Ever.Ag, LLC v. Milk Moovement, Inc. ( 2023 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 DAIRY, LLC,1 a Delaware Limited No. 2:21-cv-02233 WBS AC Liability Company, 13 Plaintiff/ 14 Counterdefendant, MEMORANDUM AND ORDER RE: DAIRY’S MOTION TO STRIKE AND 15 v. MOTION TO DISMISS SECOND AMENDED COUNTERCLAIMS 16 MILK MOOVEMENT, INC., a foreign Corporation, and MILK MOOVEMENT 17 LLC, a Delaware Limited Liability Company, 18 Defendants/ 19 Counterclaimants. 20 21 ----oo0oo---- 22 Dairy, LLC (“Dairy”) initiated this action against Milk 23 Moovement, Inc. and Milk Moovement, LLC alleging trade secret 24 misappropriation under federal and California law, and 25 intentional interference with contractual relations. (First Am. 26 Compl. (Docket No. 48).) Milk Moovement then alleged five 27 1 Dairy has changed its name to Ever.Ag. However, this 28 order will continue to refer to Dairy for convenience. 1 counterclaims: four claims for declaratory judgment under various 2 trade secret laws and one antitrust claim for sham litigation. 3 (Docket No. 111). The court dismissed the sham litigation 4 counterclaim twice, but permitted the declaratory judgment 5 counterclaims. (Docket Nos. 105, 134.) Upon obtaining new 6 information during discovery, Milk Moovement requested leave to 7 amend its counterclaims and add six new antitrust related 8 counterclaims. (Docket No. 204.) The court granted Milk 9 Moovement’s request. (Docket No. 244.) 10 In its Second Amended Counterclaims, Milk Moovement 11 alleges new facts that Dairy engaged in various types of 12 anticompetitive conduct and asserts ten counterclaims, including 13 the four previously pled declaratory judgment claims: (1) no 14 protectable trade secret under the Defend Trade Secrets Act, 18 15 U.S.C. § 1836; (2) declaratory judgment of no misappropriation 16 under the Defend Trade Secrets Act, id.; (3) declaratory judgment 17 of no protectable trade secret under the California Uniform Trade 18 Secrets Act, California Civil Code § 3426 et seq.; (4) 19 declaratory judgment of no misappropriation under the California 20 Uniform Trade Secrets Act, id.; (5) conspiracy to monopolize 21 under § 2 of the Sherman Act, 15 U.S.C. § 2; (6) monopolization 22 and attempted monopolization under § 2 of the Sherman Act, id.; 23 (7) unlawful restraint of trade under § 1 of the Sherman Act, 15 24 U.S.C. § 1; (8) unlawful restraint of trade under California’s 25 Cartwright Act, Cal. Bus. & Prof. Code §§ 16700 et seq.; (9) 26 unlawful mergers or acquisitions under § 7 of the Clayton Act, 15 27 U.S.C § 18; and (10) unfair competition under California’s Unfair 28 Competition Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200 et seq. 1 (Docket No. 249.) 2 Before the court are Dairy’s motion to strike (Docket 3 No. 270) and motion to dismiss (Docket No. 266) the Second 4 Amended Counterclaims. 5 I. Factual Allegations2 6 Milk is an important and heavily regulated commodity in 7 the United States. (2d Am. Countercls. ¶ 96.) American 8 consumers collectively spend more than $15 billion on milk each 9 year. (Id. ¶ 80.) Participants in the dairy industry manage a 10 large amount of data including milk prices, quantity, location, 11 transit updates, quality testing, and invoices. (Id. ¶ 96.) 12 Under federal law, the United States Department of 13 Agriculture (“USDA”) issues Federal Milk Marketing Orders 14 (“FMMOs”), which then set milk prices across statutorily divided 15 geographic regions. (Id. ¶ 103.) Pursuant to the FMMOs, milk 16 can be “pooled” and therefore subject to regulated pricing. (Id. 17 ¶ 104.) All Class I milk (liquid beverage milk) must be pooled. 18 (Id.) For every other class of milk, milk producers can decide 19 whether to participate in the pool. (Id.) 20 FMMOs set the rules and conditions for producers 21 pooling milk. (Id. ¶ 108.) FMMOs consider many factors 22 including how much milk the producer “pooled” the previous month 23 and whether the producer diverted milk to other plants 24 participating in the pool. (Id.) Depending on that month’s 25 2 While the court already discussed Milk Moovement’s 26 factual allegations as alleged in its Counterclaims and First Amended Counterclaims, (Docket Nos. 105, 134), the Second Amended 27 Counterclaims contain new factual allegations in support of Milk Moovement’s six new antitrust counterclaims. The court takes the 28 allegations of the Second Amended Counterclaims as true. 1 uniform price for milk, some producers will have to pay into the 2 pool while others will withdraw from the pool. (Id. ¶ 106.) 3 Milk processors are required to submit monthly reports 4 detailing their total milk receipts by class and specifying how 5 much milk was pooled. (Id. ¶ 109.) Milk processors must also 6 send monthly reports to milk producers. (Id.) These reports 7 must include a variety of metrics including the total pounds of 8 milk received from that producer by date, the minimum payments 9 required to be made to the producer under the FMMOs, and the net 10 amount of payments to the producer. (Id.) The USDA uses these 11 metrics to establish fixed minimum prices for milk and milk 12 products. (Id. ¶ 110.) 13 Because producers try to obtain the highest possible 14 price for milk, they make pooling decisions based on whether the 15 market price for a particular class of milk is higher or lower 16 than the uniform price. (Id. ¶ 107.) Milk producers also try to 17 avoid paying into the pool. (Id. ¶ 112.) Because milk producers 18 are often organized into cooperatives,3 not paying into the pool 19 allows a milk producer to use that money to pay member farms. 20 (Id.) A cooperative only engaged in milk production is motivated 21 to obtain the highest price for milk. (Id. ¶ 113.) 22 Historically, systems for tracking the dairy supply 23 chain used pen and paper and thus were inefficient and prone to 24 error. (Id. ¶ 96.) The advent of supply chain software in the 25 dairy industry, including data processing services, modernized 26 these systems. (Id.) 27 3 Milk cooperatives are entities owned by its farmer- 28 members. 1 Dairy is the largest and most dominant provider of 2 dairy software. (Id. ¶ 97.) Dairy advertises on its website 3 that “over 80 percent of the 100 largest dairy companies in the 4 country are Dairy customers.” (Id. ¶ 81.) Dairy was co-founded 5 by Dairy Farmers of America (“DFA”), which continues to have an 6 ownership interest.4 (Id. ¶ 94.) 7 DFA is the largest milk producer cooperative in the 8 country as well as an owner and operator of numerous milk 9 processors. (Id. ¶ 94.) As both a milk producer and processor, 10 DFA’s interest in the price of milk differs from the typical milk 11 producer cooperative. (Id. ¶ 114.) Whereas milk cooperatives 12 benefit from the highest possible price for milk, DFA -- as a 13 milk processor -- benefits from lower milk prices. (Id.) When 14 DFA sells milk at a low price, it does not impact its net income 15 in the same way low prices impacts other milk producers because 16 DFA can recoup any losses through its profits as a milk 17 processor. (Id. ¶ 117.) 18 DFA is Dairy’s “most important customer.” (Id. ¶ 94.) 19 DFA will not work with any Dairy competitors. (Id. ¶ 125.) As a 20 partial owner of Dairy, DFA has access to the data of other milk 21 producers who utilize Dairy’s software services. (Id. ¶ 121.) 22 In prior litigation, a district court in Vermont found evidence 23 that DFA indeed accessed the data of competing milk cooperatives. 24 (Id. ¶¶ 119-20.) Further, as the largest milk producer in the 25 country, DFA has the ability to manipulate FMMOs to suppress milk 26 prices. (Id. ¶ 114.) Because of DFA’s access to other milk 27 4 Dairy is also partially owned by the private equity 28 group, Banneker Partners. (2d Am. Countercls. ¶ 95.) 1 producers’ data and its ability to manipulate FMMOs, Dairy and 2 DFA have an incentive to block competitors in the dairy software 3 industry. (Id. ¶ 122.) Blocking competitors in the dairy 4 software industry allows Dairy to maintain and grow its dominance 5 in the dairy software industry. In turn, Dairy grants DFA access 6 to the data of many of its competitors in the milk production and 7 milk processing industry. 8 Milk Moovement is a dairy software start-up and Dairy 9 competitor. (Id. ¶ 97.) Milk Moovement created new methods for 10 tracking and analyzing production data, including a cloud-based 11 software platform which connects all entities in the dairy supply 12 chain. (Id. ¶ 97-98.) Milk Moovement’s software is used to keep 13 track of data such as how much and when milk is picked up from 14 producers. (Id. ¶ 99.) Its software allows its customers to 15 access data in-real time via computer or mobile app. (Id. ¶¶ 99- 16 100.) 17 In 2020, Dairy -- through co-owner Banneker Partners -- 18 attempted to acquire Milk Moovement. (Id. ¶¶ 163-167.) Dairy 19 had previously acquired two other entities: Data Specialists, 20 Inc. in 2018 and Ever.Ag in 2022. (Id. ¶ 154.) In addition, 21 Dairy also purchased a software system developed by a dairy 22 cooperative, United Dairymen of Arizona (“United Dairymen”). 23 (Id. ¶ 155.) However, Dairy never brought the software to 24 market. (Id.) 25 Dairy has previously had relationships with other 26 entities in the dairy industry, including California Dairies, 27 Inc. (“California Dairies”) -- a milk marketing and processing 28 cooperative in California. (First Am. Compl. ¶ 32.) In 2014, 1 California Dairies began using Dairy’s software. (Id. ¶ 33.) 2 Because of issues with Dairy’s software, California Dairies then 3 entered into an agreement with Milk Moovement in or around 4 September 2021. (Id. ¶ 37.) California Dairies subsequently 5 gave Dairy notice that it was terminating its agreement effective 6 February 1, 2022. (Id. ¶ 41.) Dairy believes that California 7 Dairies shared Dairy’s trade secrets with Milk Moovement when it 8 switched data processing service providers. (Id. ¶¶ 42-46.) 9 That belief ultimately led Dairy to initiate this lawsuit in 10 December 2021 for various trade secrets violations. (See Compl. 11 (Docket No. 1).) 12 The provisions in Dairy’s contract with Milk Moovement 13 were not unique. Rather, Dairy’s contracts impose exclusivity 14 provisions on its customer which prevent the customers from 15 leaving Dairy for one of its competitors. (2d Am. Countercls. ¶ 16 138.) These provisions convert a customer’s raw data to into 17 Dairy trade secrets. (Id. ¶¶ 139-143.) As a result, customers 18 cannot disclose their own data as necessary to change service 19 providers. (Id. ¶ 144.) If a customer does decide to terminate 20 its relationship with Dairy, they would be unable to transfer its 21 own analytics and production data. (Id. ¶ 145.) This 22 information is critical to both the customer as well as the new 23 software provider. (Id. ¶¶ 145-47.) Moreover, these provisions 24 have the effect of precluding a customer from complying with 25 federal and state law relating to the historical accounting and 26 auditing of that customer’s milk pooling and milk pricing 27 activities. (Id. ¶ 148.) 28 In addition to Dairy’s conduct preventing customers 1 from working with Milk Moovement, Dairy has also blocked Milk 2 Moovement from marketing opportunities. In 2022, Dairy barred 3 Milk Moovement from attending, sponsoring, or presenting at 4 DairyTech -- the milk industry’s leading annual technology 5 conference. (Id. ¶ 191.) The DairyTech is organized by the 6 International Dairy Foods Association. (Id.) When Milk 7 Moovement tried to become a sponsor of the event, a requirement 8 for appearing and presenting at the conference, the conference 9 organizers informed Milk Moovement that, due to the organizers’ 10 partnership with Ever.Ag (Dairy’s new trade name), any Ever.Ag 11 competitors were precluded as sponsors. (Id. ¶ 193.) 12 Dairy’s efforts against Milk Movement eventually led 13 Milk Movement to file its counterclaims against Dairy. The court 14 will first address Dairy’s motion to strike before addressing its 15 motion to dismiss the amended counterclaims. 16 II. Motion to Strike 17 A. Legal Standard 18 Federal Rule of Civil Procedure 12(f) authorizes the 19 court to “strike from a pleading an insufficient defense or any 20 redundant, immaterial, impertinent, or scandalous matter.” Fed. 21 R. Civ. P. 12(f). See Ready Transp., Inc. v. AAR Mfg., Inc., 627 22 F.3d 402, 404 (9th Cir. 2010) (a district court’s “inherent power 23 to control their docket . . . . includes the power to strike”) 24 (holding district court has power to strike an improperly filed 25 confidential document) (citing Carrigan v. Cal. State 26 Legislature, 263 F.2d 560, 564 (9th Cir. 1959) (discussing an 27 appellate court’s inherent power to strike briefs and pleadings 28 “as either scandalous, impertinent, scurrilous, and/or without 1 relevancy”)) (additional citations omitted). Because motions to 2 strike are “often used as delaying tactics,” they are “generally 3 disfavored” and are rarely granted in the absence of prejudice to 4 the moving party. Rosales v. Citibank, FSB, 133 F. Supp. 2d 5 1177, 1180 (N.D. Cal. 2001); see also N.Y.C. Emps.’ Ret. Sys. v. 6 Berry, 667 F. Supp. 2d 1121, 1128 (N.D. Cal. 2009) (“Where the 7 moving party cannot adequately demonstrate . . . prejudice, 8 courts frequently deny a motion to strike . . . .”) (citation and 9 internal quotation marks omitted). 10 B. Discussion 11 Milk Moovement filed its proposed Second Amended 12 Counterclaims attached as Exhibit 1 to its motion for leave to 13 amend. (See Mot. Leave, Ex. 1 (Docket No. 204-3).) The proposed 14 Second Amended Counterclaims included only Milk Moovement’s 15 factual allegations and its six new antitrust related claims. 16 (See id.) The proposed Second Amended Counterclaims did not 17 include Milk Moovement’s answer, affirmative defenses, or prior 18 declaratory judgment counterclaims from its Counterclaims and 19 First Amended Counterclaims (Docket Nos. 79, 111), which survived 20 two motions to dismiss. (See Docket Nos. 105, 134.) After being 21 granted leave to amend by this court, Milk Moovement filed the 22 Second Amended Counterclaims, which incorporated its previously 23 filed answer, affirmative defenses, and declaratory judgment 24 counterclaims with the new factual allegations and six 25 counterclaims from the proposed Second Amended Counterclaims. 26 (Docket No. 249.) 27 Dairy moves to strike the Second Amended Counterclaims 28 by arguing that the “filing was inappropriate and objectively 1 unreasonable” because it “was substantively and materially 2 different” than the proposed counterclaims. (Mot. Strike at 1 3 (Docket No. 270).) Dairy contends that Milk Moovement’s filing 4 of its Second Amended Counterclaims was a violation of Federal 5 Rules of Civil Procedure 15 and 16, Local Rules 137(c) and 220, 6 and the court’s order granting Milk Moovement leave to amend. 7 (Id.) Dairy asks that the court require Milk Moovement to either 8 proceed with the proposed counterclaims or proceed with the First 9 Amended Counterclaims, thereby abandoning its new antitrust 10 counterclaims. (Mot. Strike at 16.) The court will decline 11 Dairy’s request. 12 As Milk Moovement explains: “Every single word in the 13 [Second Amended Counterclaims] was either (i) already part of the 14 case in the existing answer, defenses or claims, or (ii) the 15 Court had expressly authorized it to be added to the case by 16 granting leave to amend.” (Opp’n Mot. Strike at 3 (Docket No. 17 291).) As discussed below, the court rejects all of Dairy’s 18 arguments. The court sees Dairy’s motion to strike as simply a 19 second attempt to dismiss Milk Moovement’s new antitrust 20 counterclaims in the event its concurrently filed motion to 21 dismiss (Docket No. 266) is unsuccessful. 22 First, Dairy argues that the court should strike the 23 Second Amended Counterclaims because they were filed in violation 24 of Local Rule 220, which states that “every pleading to which an 25 amendment or supplement is permitted as a matter of right or has 26 been allowed by court order shall be retyped and filed so that it 27 is complete in itself without reference to the prior or 28 1 superseded pleading.”5 But the Second Amended Counterclaims, as 2 filed, complies with Rule 220 as it contains Milk Moovement’s 3 answer, affirmative defenses, and counterclaims.6 See L.R. 220 4 Next, Dairy argues that the Second Amended 5 Counterclaims violate the court’s order granting Milk Moovement 6 leave to amend under Rules 15 and 16 of the Federal Rules of 7 Civil Procedure because Milk Moovement was not granted leave to 8 file a “synthesized” pleading.7 (Mot. Strike at 11-13.) Again, 9 the court disagrees. Unlike the cases upon which Dairy relies,8 10 11 5 It appears that Dairy is attempting to argue that Exhibit 1 attached to its leave to amend -- the proposed 12 Counterclaims -- is a pleading. However, as Milk Moovement points out, under Fed. R. Civ. P. 7(a), an exhibit is not a 13 pleading. See Fed. R. Civ. P. 7(a) (listing types of pleadings allowed, including a complaint, an answer, and an answer to a 14 counterclaim designated as a counterclaim). 15 6 Dairy also points out that the filed Second Amended Counterclaims incorporate by reference earlier pleadings, 16 specifically references to the First Amended Counterclaims. (See Mot. Strike at 13-14.) Milk Moovement explains that these were 17 typographical errors that were supposed to reference the Second Amended Counterclaims. (See Opp’n Mot. Strike at 11 n. 5). 18 While counsel is cautioned to avoid such basic errors, the court declines to find the pleading violated Rule 220 on the basis of a 19 typographical error. 20 7 Dairy suggests that a “synthesized pleading” is a pleading which is a “synthesis” of the operative parts of other 21 pleadings. Thus, Dairy contends that Milk Moovement’s Second Amended Counterclaims is a “synthesized pleading” as it contains 22 the operative portions of Milk Moovement’s Answer and First 23 Amended Counterclaims as well as its proposed Second Amended Counterclaims. 24 8 The cases upon which Dairy relies in support of its 25 motion to strike all involve instances where a party filed an amended pleading that greatly differed from the proposed 26 pleading. See e.g., Hazdovac v. Mercedez-Benz USA, LLC, No. 20- cv-00377 RS, 2022 WL 2161506, at *2 (N.D. Cal. June 15, 2022) 27 (“The new [c]omplaint is littered with hundreds of changes compared to the proposed complaint, with paragraph after 28 paragraph of new material in certain sections.”). 1 the Second Amended Counterclaims include no new facts or claims 2 that were not already asserted in the First Amended Counterclaims 3 or proposed Second Amended Counterclaims. Rather, the answer and 4 affirmative defenses included in the Second Amended Counterclaims 5 are identical to those in the First Amended Counterclaims. Dairy 6 also argues that Milk Moovement abandoned the previously pled 7 declaratory judgment counterclaims because they were not included 8 in the proposed Second Amended Counterclaims. To the extent 9 leave must be given to ensure the previously pled declaratory 10 judgment counterclaims are properly included in the Second 11 Amended Counterclaims, it is hereby granted. 12 Finally, Dairy argues that the court should strike the 13 Second Amended Counterclaims because they were filed in violation 14 of Local Rule 137(c). Local Rule 137(c) provides: “If filing a 15 document requires leave of court, such as an amended complaint 16 after the time to amend as a matter of course has expire, counsel 17 shall attach the document proposed to be filed as an exhibit to 18 moving papers seeking such leave and lodge a proposed order as 19 required by these Rules.” L.R. 137(c). 20 Dairy is correct that Milk Moovement did not comply 21 with the precise requirements of Local Rule 137(c) because it 22 failed to incorporate its new counterclaims into its preexisting 23 answer, affirmative defenses, and declaratory judgment 24 counterclaims. Nevertheless, the court declines Dairy’s 25 invitation to strike the six new counterclaims where Dairy has 26 not adequately shown that it will be prejudiced.9 See Rosales, 27 9 Dairy argues it will be prejudiced because it “relied upon the proposed [Second Amended Counterclaims] in deciding 28 whether to oppose and evaluating what arguments were available 1 133 F. Supp. 2d at 1180. 2 Moreover, to strike the Second Amended Counterclaims on 3 any procedural ground would be futile. The court would strike 4 these counterclaims without prejudice, allowing Milk Moovement to 5 refile the exact same pleading as their currently filed Second 6 Amended Counterclaims. Dairy would then refile their motion to 7 dismiss. Thus, the case would be in the same position as it is 8 today, except having endured a months long delay. The court 9 therefore declines to strike the six new counterclaims, which it 10 granted leave to amend, on a pure procedural technicality and for 11 which Dairy cannot honestly claim it will suffer any prejudice. 12 Dairy’s motion is to strike is nothing more than a 13 disfavored delay tactic. Such a motion is a waste of the court’s 14 time and resources. Accordingly, Dairy’s motion to strike the 15 Counterclaims (Docket No. 270) is denied. 16 III. Motion to Dismiss 17 A. Legal Standard 18 Federal Rule of Civil Procedure 12(b)(6) allows for 19 dismissal when the plaintiff’s complaint fails to state a claim 20 and should be made in opposition.” (Mot. Strike at 8.) Dairy’s 21 argument is without merit. At the hearing for Milk Moovement’s motion for leave to amend, Milk Moovement’s counsel made clear 22 its intentions to file one synthesized pleading which would contain its answer, affirmative defenses, and counterclaims. 23 Moreover, counsel for Milk Moovement again informed Dairy’s counsel that it was going to file a synthesized pleading by email 24 prior to filing the Second Amended Counterclaims. (Opp’n Mot. Strike at 9.) Nothing in the Second Amended Counterclaims was 25 new or a surprise to Dairy. Finally, Dairy cannot argue that it will be prejudiced by having to defend itself against “new and 26 expansive antitrust claims.” See Fru-Con Constr. Corp. v. Sacramento Mun. Util. Dist., No. CIV. S-05-583 LKK GGH, 2006 WL 27 3733815, at *5 (E.D. Cal. Dec. 15, 2006) (citation omitted) (“The fact that the amended counterclaim may cause more work does not 28 constitute prejudice.”). 1 upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). 2 “A Rule 12(b)(6) motion tests the legal sufficiency of a claim.” 3 Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The inquiry 4 before the court is whether, accepting the allegations in the 5 complaint as true and drawing all reasonable inferences in the 6 plaintiff’s favor, the complaint has alleged “sufficient facts 7 . . . to support a cognizable legal theory,” id., and thereby 8 stated “a claim to relief that is plausible on its face,” Bell 9 Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In deciding 10 such a motion, all material allegations of the complaint are 11 accepted as true, as well as all reasonable inferences to be 12 drawn from them. Id. 13 “In order to survive a motion to dismiss under Rule 14 12(b)(6), an antitrust complaint ‘need only allege sufficient 15 facts from which the court can discern the elements of an injury 16 resulting from an act forbidden by the antitrust laws.’” Cost 17 Mgmt. Servs. Inc. v. Washington Nat. Gas Co., 99 F.3d 937, 950 18 (9th Cir. 1996) (citation omitted). “A motion to dismiss a 19 counterclaim brought pursuant to Rule 12(b)(6) is evaluated under 20 the same standard as motion to dismiss a plaintiff’s complaint.” 21 Niantic, Inc. v. Gobal++, 19-cv-03425 JST, 2020 WL 1548465, at *2 22 (N.D. Cal. Jan. 30, 2020). 23 B. Relevant Market 24 As the first step in any antitrust action, a “plaintiff 25 must allege both that a relevant market exists and that the 26 defendant how power within that market.” Newcal Indus., Inc. v. 27 Ikon Office Sols., 513 F.3d 1038, 1044 (9th Cir. 2008). See FTC 28 v. Qualcomm Inc., 969 F.3d 974, 992 (9th Cir. 2020) (“A threshold 1 step in any antitrust case is to accurately define the relevant 2 market . . .”) (citations omitted); Netafirm Irrigation, Inc. v. 3 Jain Irrigation, Inc., 562 F. Supp. 3d 1073, 1081 (E.D. Cal. 4 2021) (Ishii, J.) (citations omitted) (“Setting the relevant 5 market boundaries is a critical first step as it enables the 6 court to assess issues regarding market share, defendant’s 7 ability to lessen or destroy competition, and the alleged 8 antitrust injury.”). 9 A ‘market’ is the group of sellers or produces who have 10 the ‘actual or potential ability to deprive each other of 11 significant levels of business.’” Rebel Oil Co. v. Atl. 12 Richfield Co., 51 F.3d 1421, 1434 (9th Cir. 1995) (citations and 13 quotation omitted). “The relevant market must include both a 14 geographic market and a product market.” Hicks v. PGA Tour, 15 Inc., 897 F.3d 1109, 1120 (9th Cir. 2019) (citation omitted). 16 1. Product Market 17 “[T]he [product] market must encompass the product at 18 issue as well as all economic substitutes for the product.” 19 Newcal, 513 F.3d at 1045 (citation omitted). “The outer 20 boundaries of a product market are determined by the reasonable 21 interchangeability of use or the cross-elasticity of demand 22 between the product itself and substitutes for it.” Id. (quoting 23 Brown Shoe v. United States, 370 U.S. 294, 325 (1962)). “The 24 analysis looks to both ‘whether two products can be used for the 25 same purpose, and if so, whether and to what extent purchasers 26 are willing to substitute one for the other.” FTC v. Facebook, 27 Inc., 560 F. Supp. 3d 1, 17 (D.D.C. 2021) (citation omitted). 28 Here, Milk Moovement defines the relevant product 1 market as “the market for data services for milk producers and 2 processors.”10 (2d Am. Countercls. ¶ 124.) As Milk Moovement 3 explains, “both Dairy and Milk Moovement package their supply 4 chain data as integrated systems of software” for the dairy 5 industry. (Opp’n Mot. Dismiss at 10.) The dairy industry’s 6 regulatory scheme limits the types of products which could offer 7 these services.11 See Verizon Commc’ns Inc. v. Law Offs. of 8 Curtis V. Trinko, LLP, 540 U.S. 398, 411 (2004) (“Antitrust 9 analysis must always be attuned to the particular structure and 10 circumstances or the industry at issue. Part of that attention 11 to economic context is an awareness of the significance of 12 regulation.”). That both Dairy and Milk Moovement offer data 13 processing services for the dairy industry is sufficient to 14 define the product market at this stage. See Thurman Indus., 15 Inc. v. Pay ‘N Pak Stores, Inc., 875 F.2d 1369, 1374 (9th Cir. 16 10 Milk Moovement also alleges that the market for milk production and the market for milk processing are additional 17 relevant markets because DFA -- the largest milk producer and one 18 of the largest milk processors in the United States -- has an ownership interest in Dairy. (2d Am. Countercls. ¶ 125.) 19 11 Dairy attempts to argue that Milk Moovement was 20 required to specifically identify other competitors because “data service providers” could include countless technology companies 21 including Amazon’s AWS and SAP. (Mot. Dismiss at 16). The court 22 is unpersuaded. While presumably any company that provides data services could build the capabilities to provide data processing 23 services for the dairy industry, the fact that they do not do so at this time means that they do not compete within the relevant 24 product market. See Facebook, 560 F. Supp. 3d at 17 (“[T]he fact that other services are not primarily used for the sort of 25 personal sharing that is the hallmark of a [social media] service seems a plausible reason why little switching would occur.”). 26 Moreover, “the question of whether the market should include 27 other products is better resolved at the summary judgment stage.” Klein v. Facebook, Inc., 580 F. Supp. 3d 743, 765 (N.D. Cal. 28 2022) (citation and quotations omitted). 1 1989) (“The goods and services that sellers or producers offer 2 provide the best indicia of who competes in the same market.”). 3 While identifying other competitors in the market would provide a 4 clearer picture of the market, particularly given Milk 5 Moovement’s allegations that the market is heavily concentrated, 6 there is no requirement that Milk Moovement identify every 7 competitor. See Klein, 580 F. Supp. 3d at 765 (“A plaintiff is 8 not required to identify every alleged competitor in its 9 pleadings.”) (citation and internal quotations omitted). 10 Similarly, the court finds no issue with Milk 11 Moovement’s limitation that the data services are “for milk 12 producers and processors.” Contrary to Dairy’s argument, this 13 limitation describes the product, not the consumers. See Brown 14 Shoe, 370 U.S. at 325 (a market “may be determined by examining 15 such practical indicia as . . . the product’s peculiar 16 characteristics and uses . . . [and] distinct customers”). 17 Accordingly, the court finds Milk Moovement has sufficiently pled 18 a relevant product market. 19 2. Geographic Market 20 “The geographic market extends to the area of effective 21 competition where buyers can turn for alternative sources of 22 supply.” Tanaka v. Univ. of S. Cal., 252 F.3d 1059, 1063 (9th 23 Cir. 2011) (citations and internal punctuation omitted). There 24 are two ways that courts define a geographic market: (1) the 25 location of the relevant suppliers, which “must include all the 26 firms with the relevant production, sales, or service facilities 27 in the specific region”; or (2) the location of the relevant 28 customers, which must include “all the firms that sell to 1 customers in the geographic region, regardless of the location of 2 the supplier making those sales.” Pacific Steel Grp. v. Com. 3 Metals Co., 600 F. Supp. 3d 1056, 1068 (N.D. Cal. 2022) (citing 4 2010 Dep’t of Justice and FTC Horizontal Merger Guidelines §§ 5 4.2.1, 4.2.2). 6 Here, Milk Moovement defines the geographic market as 7 the United States or, in the alternative, the sub-national 8 regions for milk purchasing established by the USDA: Northeast, 9 Appalachian, Florida, Southeast, Upper Midwest, Central, Midwest, 10 California, Pacific Northwest, Southwest, and Arizona. (2d Am. 11 Countercls. ¶ 126-27.) 12 At this stage, the court finds both geographic markets 13 are sufficiently pled. The dairy industry is heavily regulated 14 by the federal government. Thus, while Milk Moovement and Dairy 15 both operate overseas, federal regulation determines the 16 geographic boundaries in which milk producers and processors must 17 operate. Further, the FMMO system does not apply outside of the 18 United States. Cf. Brown Shoe, 370 U.S. at 336-37 (“The 19 geographic market selected must . . . correspond to the 20 commercial realities of the industry . . . .”) (internal 21 quotations omitted). The court finds it plausible that industry 22 regulations control whether one sub-region could turn to another 23 for alternative supply. Accordingly, the court finds Milk 24 Moovement has sufficiently pled a relevant geographic market. 25 Because Milk Moovement has plausibly defined both a 26 relevant product market and a relevant geographic market, it has 27 sufficiently pled a relevant market at this stage. See Newcal, 28 513 F.3d at 1045 (“[Because] the validity of the ‘relevant 1 market’ is typically a factual element, alleged markets may 2 survive scrutiny under Rule 12(b)(6) subject to factual testing 3 by summary judgment or trial.”) (citations omitted); Netafirm, 4 562 F. Supp. 3d at 1081 (relevant market allegations are often 5 able to survive scrutiny under Rule 12(b)(6) because “relevant 6 market determinations are typically fact-intensive, with actual 7 inquiry into the commercial realities faced by consumers”) 8 (citations and internal quotations omitted). 9 C. Market Power 10 “Along with a relevant market definition, a plaintiff 11 must plead that the defendant has power within that market.” 12 Netafirm, 562 F. Supp. 3d at 1085 (citing Newcal) (additional 13 citations omitted). “The essence of market power is a firm’s 14 ‘ability to raise prices profitably by restricting output.’” 15 Pacific Steel, 600 F. Supp. 3d at 1072 (quoting Ohio v. Am. 16 Express Co., 138 S. Ct. 2274, 2288 (2018)). “[Courts] rely on 17 market power to help distinguish between restraints that are 18 likely to substantially impair competition and those that are 19 not.” Flaa v. Hollywood Foreign Press Ass’n, 55 F.4th 680, 693 20 (9th Cir. 2022) (citations omitted). “A plaintiff may prove that 21 a restraint has anticompetitive effect either ‘directly or 22 indirectly.” Qualcomm, 969 F.3d at 989 (quoting Am. Express, 138 23 S. Ct. at 2284). 24 1. Direct Evidence 25 “Direct evidence includes proof of actual detrimental 26 effects on competition, such as reduced output, increased prices, 27 or decreased quality in the relevant market.” Qualcomm, 969 F.3d 28 at 989 (citations and internal quotations omitted). Here, Milk 1 Moovement alleges that Dairy “charge[s] supracompetitive prices 2 and wrongly restricts customers’ ability to freely choose their 3 service providers.” (2d Am. Countercls. ¶ 136.) Milk Moovement 4 further alleges that Dairy “is able to charge [their] 5 supracompetitive prices to its customers even while it provides 6 poor, lackluster service.” (Id. ¶ 137.) 7 In support of these allegations, Milk Moovement refers 8 to documents produced in discovery which purport to show that: 9 there were significant problems with Dairy’s software that went 10 uncorrected for years; Dairy did not have the software capacity 11 that at least one customer, California Dairies, required; Dairy 12 sought to charge California Dairies an additional $120,000 to 13 provide the requested services; and Dairy’s CEO not only knew 14 about Dairy’s failure to provide these services but also thought 15 that charging for such services should be Dairy’s standard 16 practice. (2d Am. Countercls. ¶¶ 169, 172, 176.) 17 Milk Moovement further alleges that the various 18 exclusivity provisions in Dairy’s customer contracts meant that 19 any customer seeking to leave Dairy “would be forced to leave 20 behind years of its own analytics and production data -- 21 information that Dairy knows forms the lifeblood of strategic 22 decision making in the industry.” (2d. Am. Countercls. ¶ 145.) 23 Not only would such provisions deter any customer from leaving 24 Dairy, but they would also deny any Dairy competitor “the 25 functionality necessary to permit an ‘apples to apples’ 26 comparison between different time periods.”12 (Id. ¶ 146.) 27 12 Dairy argues that the fact California Dairies left 28 Dairy after Dairy tried to charge a higher price shows that Dairy 1 Because its customers were barred from leaving, Dairy could 2 provide lower quality services. See Qualcomm, 969 F.3d at 989. 3 2. Circumstantial Evidence 4 “To demonstrate market power circumstantially, a 5 plaintiff must: (1) define the relevant market, (2) show that the 6 defendant owns a dominant share of that market, and (3) show that 7 there are significant barriers to entry and show that existing 8 competitors lack the capacity to increase their output in the 9 short run.” Rebel Oil, 51 F.3d at 1434 (citations omitted). As 10 discussed above, Milk Moovement has sufficiently defined the 11 relevant market. 12 i. Market Share 13 “Measurement of market share is necessary to determine 14 whether the defendant possesses sufficient leverage to influence 15 marketwide output.” Rebel Oil, 51 F.3d at 1437; see Pacific 16 Steel, 600 F. Supp. 3d at 1073 (“[A] dominant share of the market 17 often carries with it the power to control output across the 18 market and in so doing control prices.”) (citing Image Tech 19 Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1206 (9th Cir. 20 1997)). Generally, a 65 percent market share is sufficient to 21 establish a prima facie case of market power. Optronic Techs., 22 Inc. v. Ningbo Sunny Elec. Co., 20 F.4th 466, 484 (9th Cir. 2021) 23 (citation omitted). A lower market share is permissible for 24 claims of attempted monopolization. See Rebel Oil, 51 F.3d at 25 could not in fact charge supracompetitive prices. (See Mot. 26 Dismiss at 26.) Dairy, however, chooses to look at the factual 27 allegations only in isolation. While California Dairies did leave Dairy for Milk Moovement, doing so led Dairy to initiate 28 this action. 1 1438 (finding 44 percent sufficient in an attempted 2 monopolization case). 3 Here, Milk Moovement alleges that Dairy’s market share 4 exceeds 80 percent because, as Dairy advertises on its website, 5 “over 80 percent of the 100 largest dairy companies in the 6 country are Dairy.com customers.” (2d. Am. Countercls. ¶ 134.) 7 The court shares Dairy’s concerns that Milk Moovement appears to 8 have premised its market share allegation solely upon this 80 9 percent figure. However, plaintiffs are not required to plead 10 market share with specificity or to explain how they arrived at 11 their market share allegation. See United Energy Trading, LLC v. 12 Pac. Gas & Elec., 200 F. Supp. 3d 1012, 1020 (N.D. Cal. 2016) 13 (finding sufficient an alleged market share of 70 to 90 percent); 14 Teradata Corp. v. SAP SE, No. 18-cv-03670 WHO, 2018 WL 6528009, 15 at *19 (N.D. Cal. Dec. 12, 2018) (finding sufficient an alleged 16 market share of 60 to 90 percent “on information and belief”). 17 Moreover, Dairy’s arguments that Milk Moovement’s market share 18 allegation is insufficient are predominately factual and thus not 19 suitable at the motion to dismiss stage.13 Because a market share 20 of above 80 percent is more than sufficient to establish market 21 power, see Optronic, 20 F.4th at 484, Milk Moovement has 22 sufficiently alleged market power at this stage. 23 ii. Entry Barriers 24 “Market power cannot be inferred solely from a dominant 25 market share.” Pacific Steel, 600 F. Supp. 3d at 1073 (citation 26 13 Dairy further argues that Milk Moovement failed to offer an explanation as to why the 80 percent figure is relevant 27 to relevant geographic markets when three of the top ten companies on the list of the 100 largest dairy companies have 28 locations outside of the United States. (Mot. Dismiss at 23.) 1 omitted). “The plaintiff must show that new rivals are barred 2 from entering the market and show that existing competitors lack 3 the capacity to expand their output to challenge the predator’s 4 high price.” Rebel Oil, 51 F.3d at 1439 (citation omitted). 5 “Entry barriers are ‘additional long-run costs that were not 6 incurred by incumbent firms but must be incurred by new 7 entrants,’ or ‘factors in the market that deter entry while 8 permitting incumbent firms to earn monopoly returns.’” Id. at 9 1439 (citation omitted). 10 “In evaluating entry barriers, we focus on their 11 ability to constrain not those already in the market, but . . . 12 those who would enter but are prevented from doing so.” Id. at 13 1439 (citation and internal quotation omitted). “The fact that 14 entry has occurred does not necessarily preclude the existence of 15 ‘significant’ entry barriers. . . . Barriers may still be 16 ‘significant’ if the market is unable to correct itself despite 17 the entry of small rivals.” Id. at 1440. 18 “The main sources of entry barriers are: (1) legal 19 license requirements; (2) control of an essential or superior 20 resource; (3) entrenched buyer preferences for established 21 brands; (4) capital market evaluations imposing higher capital 22 costs on new entrants; and, in some situations, (5) economies of 23 scale.” Id. at 1439 (citations omitted). See e.g., id. at 1439- 24 40 (municipal regulations and state laws regarding oil and gas 25 are entry barriers); United Energy, 200 F. Supp. 3d at 1021-23 26 (regulations regarding natural gas are entry barriers); Pacific 27 Steel, 600 F. Supp. 3d at 1074 (environmental regulations, cost 28 and time, and complexity involved in building and operating a 1 steel mill are entry barriers); Klein, 580 F. Supp. 3d at 779 2 (the switching costs between social media networks are entry 3 barriers). 4 Here, Milk Moovement alleges that there are substantial 5 barriers to entry in the market for data services for milk 6 producers and processors. Because the milk industry is heavily 7 regulated, it is both more complicated and costly for new 8 entrants to comply with those regulations than an existing 9 competitor. (2d. Am. Countercls. ¶ 129.) Milk Moovement also 10 alleges that Dairy has created multiple barriers including: (1) 11 Dairy’s de facto exclusive contracts, which restrict new entrants 12 to the market; (2) Dairy’s customer-owner relationship with DFA, 13 the largest milk producer and one of the largest milk processors 14 in the country; and (3) Dairy’s confidentiality provisions, which 15 frustrate a new entrant’s ability to speak with a potential 16 customer about their user requirements and data. (Id. ¶ 129- 17 132.) Milk Moovement has thus alleged facts which plausibly show 18 that Dairy charges supracompetitive prices, restricts customers 19 from choosing their dairy data service provider, has a market 20 share of over 80 percent, and has created multiple barriers to 21 entry. 22 For the reasons stated above, the court finds Milk 23 Moovement has sufficiently alleged both direct and circumstantial 24 evidence showing anticompetitive restraint. Accordingly, Milk 25 Moovement has sufficiently pled that Dairy has market power 26 within the relevant market. The court will next address Milk 27 Moovement’s various antitrust claims. 28 D. Sherman Act § 2 1 Section 2 of the Sherman Act provides: “Every person 2 who shall monopolize, or attempt to monopolize, or combine or 3 conspire with any other person or persons, to monopolize any part 4 of the trade or commerce among the several States, or with 5 foreign nations, shall be deemed guilty . . . .” 15 U.S.C. § 2. 6 Here, Milk Moovement asserts two claims under § 2 of the Sherman 7 Act: conspiracy to monopolize (Claim 5) and monopolization and 8 attempted monopolization (Claim 6). 9 1. Antitrust Injury 10 “A plaintiff may only pursue an antitrust action if it 11 can show ‘antitrust injury, which is to say injury of the type 12 the antitrust laws were intended to prevent and that flows from 13 that which makes defendants’ acts unlawful.’” Am. Ad. Mgmt, Inc. 14 v. Gen. Tel. Co. of Cal., 190 F.3d 1051, 1055 (9th Cir. 1999) 15 (citations and internal quotations omitted). “[C]onduct that 16 eliminates rivals reduces competition. But reduction of 17 competition does not invoke the Sherman Act until it harms 18 consumer welfare.” Rebel Oil, 51 F.3d at 1433 (citations 19 omitted). “[A] causal antitrust injury is a substantive element 20 of an antitrust claim, and the fact of injury or damage must be 21 alleged at the pleading stage.” Somers v. Apple, Inc., 729 F.3d 22 953, 963 (9th Cir. 2013). 23 An antitrust injury consists of five elements: “(1) 24 unlawful conduct, (2) causing an injury to the plaintiff, (3) 25 that flows from that which makes the conduct unlawful, . . . (4) 26 that is of the type that the antitrust laws were intended to 27 prevent,’ and (5) ‘the injured party [is] a participant in the 28 same market as the alleged malefactors.” Id. (citation omitted). 1 “There can be no antitrust injury if the plaintiff stands to gain 2 from the alleged unlawful conduct.” Am. Ad., 190 F.3d at 1056 3 (citation omitted); see Reveal Chat Holdco, LLC v. Facebook, 4 Inc., 471 F. Supp. 3d 981, 998 (N.D. Cal. 2020) (“An increase in 5 market prices, ‘though harmful to competition, actually 6 benefit[s] competitors.’”) (quoting Matsushita Elec. Indus. Co. 7 v. Zenith Radio Corp., 475 U.S. 574, 583 (1986)). 8 Courts have recognized various types of antitrust 9 injuries, including limiting consumer choice, reducing output and 10 innovation, and increasing prices for lower quality and fewer 11 services. See e.g., Glen Holly Ent., Inc. v. Tektronix Inc., 343 12 F.3d 1000, 1011 (9th Cir. 2003) (“One form of antitrust injury is 13 ‘[c]oercive activity that prevents its victims from making free 14 choices between market alternatives.’”) (citation omitted); 15 Klein, 580 F. Supp. 3d at 804 (“[Plaintiffs] have suffered an 16 injury because Facebook ‘detrimentally changed the market make-up 17 and limited consumers’ choice to one source of output.’”) 18 (citation omitted); In re Juul Labs Labs, Inc. Antitrust Litig., 19 555 F. Supp. 3d 932, 959 (N.D. Cal. 2021) (antitrust injury 20 plausible where plaintiff asserted allegations of 21 “supracompetitive process, reduced output, and reduced 22 innovation”); Sumotext Corp. v. Zoove, Inc., No. 16-cv-01370 BLF, 23 2017 WL 2774382, *10 (N.D. Cal. 2017) (allegations that customers 24 “have been forced to pay supracompetitive prices while receiving 25 lower quality and few services with more onerous and adhesive 26 contract terms” and that the market has suffered “price 27 increases, lower quality products, and few market alternatives” 28 are sufficient to plead antitrust injury at the motion to dismiss 1 stage). 2 Here, Milk Moovement alleges that Dairy’s 3 anticompetitive scheme included locking customers into de facto 4 exclusive contracts, unlawfully acquiring competitors, and 5 barring Milk Moovement from marketing opportunities. (2d Am. 6 Countercls. ¶¶ 140-43, 151-67, 193.) Milk Moovement further 7 alleges that “Dairy’s conduct has inhibited Milk Moovement and 8 other competitors from entering the market and deterred customers 9 from freely switching service providers, all of which has 10 increased prices, decreased consumer choice, and resulted in 11 worse services than would otherwise exist.” (Id. ¶ 168.) 12 Dairy’s arguments that Milk Moovement failed to 13 plausibly allege antitrust injury are unpersuasive. First, Dairy 14 contends that any claims concerning its 2015 purchase of United 15 Dairymen’s software system and the 2018 acquisition of Data 16 Specialists, Inc. are barred by the statute of limitations. (See 17 Mot. Dismiss at 28-29.) Milk Moovement’s antitrust claims all 18 have a four-year statute of limitations. See 15 U.S.C. § 15b 19 (Sherman Act and Clayton Act); Cal. Bus. & Prof. Code § 16750.1 20 (Cartwright Act); Cal. Bus. & Prof. Code § 17208 (UCL). The fact 21 that some acquisitions occurred outside the four-year statute of 22 limitations does not mean that Milk Moovement has failed to 23 plausibly allege antitrust injury at this stage. Moreover, Milk 24 Moovement notes that while only the 2022 acquisition of Ever.Ag 25 can give rise to damages, there is no statute of limitations for 26 injunctive relief claims under Section 16 of the Clayton Act. 27 (Opp’n Mot. Dismiss at 24.) Thus, if the time-barred acquisition 28 is found to violate antitrust laws, Dairy can be ordered to 1 divest that acquisition. See California v. Am. Stores Co., 495 2 U.S. 271, 282 (1990) (“[T]he plain text of § 16 [of the Clayton 3 Act] authorizes divestiture decrees to remedy § 7 violations.”). 4 The court likewise rejects Dairy’s argument that Milk 5 Moovement failed to plausibly allege that the companies Dairy 6 acquired were “competitors” of Dairy. (See Mot. Dismiss at 29- 7 31.) For example, the press releases which explain how the 8 acquisitions were intended to further develop Dairy’s services 9 plausibly suggest that the acquisitions were of competitors.14 10 (See Opp’n Mot. Dismiss at 24-25 (Docket No. 289).) Dairy’s 11 arguments to the contrary involve factual determinations and 12 therefore are not appropriate at the motion to dismiss stage.15 13 Milk Moovement has alleged facts showing that Dairy’s 14 15 14 The press release announcing the acquisition of Data Specialists stated that the “[Data Specialists] manufacturing 16 suite” was “a powerful solution that handles complex in-plant processing, further extending Dairy.com traceability capabilities 17 across the supply chain.” (Opp’n Mot. Strike at 24-25.) The press release for the Ever.Ag acquisition was similar: “[Dairy 18 is] now even more capable of supporting the connected supply 19 chain and ultimately empowering it to feed a growing world.” (Id. at 25.) 20 15 In addition to arguing that Milk Moovement failed to 21 allege that the acquisitions were of competitors, Dairy argues that (1) Milk Moovement failed to plead that it suffered a 22 legally cognizable antitrust injury because Milk Moovement stood to gain from the alleged increase in prices, (2) Milk Moovement’s 23 allegations that Dairy had an inferior product in fact created Milk Moovement’s business opportunity, (3) contractual 24 restrictions in software and grant-base licenses are reasonable, and (4) enforcement of contractual rights is entitled to Noerr- 25 Pennington protection. (Mot. Dismiss at 32-34.) The Noerr- Pennington doctrine “provides that those who petition any 26 department of the government for redress,” including the judicial branch, “are generally immune from statutory liability for their 27 petitioning conduct.” B&G Foods N. Am., Inc. v. Embry, 29 F.4th 527, 535 (9th Cir. 2022). 28 1 conduct, including acquisition of competitors and exclusive 2 contracts, prevented Milk Moovement from growing in the market 3 for dairy data processing services, limited consumer choice, and 4 increased prices. The court therefore finds that Milk Moovement 5 has sufficiently alleged antitrust injury. 6 2. Conspiracy to Monopolize (Claim 5) 7 To state a claim for conspiracy to monopolize under § 2 8 of the Sherman Act, a plaintiff must show: “(1) an agreement or 9 understanding [alleged conspirators]; (2) a specific intent to 10 monopolize; and (3) overt acts in furtherance of the alleged 11 conspiracy.” Optronic, 20 F.4th at 482 (citation and internal 12 quotations omitted). 13 Here, Milk Moovement alleges that Dairy and DFA 14 conspired to monopolize the relevant market by virtue of their 15 customer-owner relationship, DFA’s refusal to work with Dairy’s 16 competitors in the dairy data processing market, and DFA’s 17 ability to restrict competition in the milk production market by 18 suppressing milk prices. (2d Am. Countercls. ¶ 223.) 19 Contrary to Dairy’s argument, the court does not read 20 Milk Moovement’s counterclaim as advancing a “shared monopoly”16 21 theory because DFA does not operate in the relevant market. See 22 Standfacts Credit Servs. Inc., v. Experian Info. Sol., 405 F. 23 Supp. 2d 1141, 1152 (C.D. Cal. 2005) (“[A]n allegation of 24 conspiracy to create a shared monopoly does not plead a claim of 25 conspiracy under section 2.”) (citation omitted); see also United 26 27 16 A “shared monopoly” is an oligopoly. See Consol. Terminal Sys. Inc., v. ITT World Comms., Inc., 535 F. Supp. 225, 28 228-29 (S.D. N.Y. 1982). 1 Food & Com. Workers Local 1776, et al. v. Teikoku Pharma USA, 2 Inc., 74 F. Supp. 3d 1052, 1076 (N.D. Cal. 2014) (“A monopoly, by 3 definition, consists of a single firm, and both monopolization 4 and attempted monopolization are single-firm violations[.]”) 5 (citation omitted). 6 Rather, Milk Moovement’s allegations plausibly show 7 that Dairy and DFA “conspired to endow” Dairy with market power 8 in the data processing market. See United Food, 74 F. Supp. 3d 9 at 1077 (dismissing claim because complaint “d[id] not allege 10 that the parties conspired to endow either [party] with market 11 power”). Milk Moovement’s theory is that DFA’s suppression of 12 milk prices prevents other milk producers from entering or 13 growing in the market for milk production. This limits the 14 number of milk producers who could seek data processing services 15 from a Dairy competitor. The limited number of milk producers 16 thus blocks data processing companies from entering and growing 17 in the relevant market. Dairy thus “leverage[s] [its] monopoly 18 to prevent other market participants . . . from reaching scale as 19 a viable competitor.” (Id. ¶ 223.) Accordingly, the court finds 20 that Milk Moovement has alleged facts sufficient to support a 21 claim for conspiracy under § 2 of the Sherman Act. 22 2. Monopolization and Attempt (Claim 6) 23 Milk Moovement also asserts a claim for monopolization 24 and attempted monopolization under § 2 of the Sherman Act. To 25 state a claim for monopolization under § 2 of the Sherman Act, “a 26 plaintiff must show: (a) the possession of monopoly power in the 27 relevant market; (b) the willful acquisition or maintenance of 28 that power, and (c) causal antitrust injury.” Qualcomm, 969 F.3d 1 at 990 (internal quotations and citations omitted); see also 2 Verizon, 540 U.S. at 878-79 (“[T]he willful acquisition or 3 maintenance of [monopoly] power . . . distinguishe[s] [power] 4 from growth or development as a consequence of a superior 5 product, business acumen, or historic accident.”) (citation and 6 quotation omitted). 7 To state a claim for attempted monopolization under § 8 2, a plaintiff must show: “(1) specific intent to control prices 9 or destroy competition; (2) predatory or anticompetitive conduct 10 to accomplish the monopolization; (3) dangerous probability of 11 success; and (4) causal antirust injury.” Cost Mgmt. Servs., 12 Inc. v. Wash. Nat. Gas Co., 99 F.3d 937, 949-50 (9th Cir. 1996); 13 see also Optronic, 20 F.4th at 481-82. “A plaintiff may 14 establish specific intent to monopolize through either direct 15 evidence of unlawful design or circumstantial evidence 16 principally of illegal conduct.” Optronic, 20 F.4th at 483 17 (citation and internal quotations omitted). 18 For reasons similar to those already discussed, the 19 court finds Milk Moovement plausibly alleges its claim for 20 monopolization and attempted monopolization under § 2. Milk 21 Moovement alleges that Dairy acquired competitors and used 22 exclusivity contracts to prevent customers from leaving Dairy to 23 work with its competitors. (2d. Am. Countercls. ¶¶ 138-45, 151- 24 55.) Such allegations are sufficient to show that Dairy both 25 acquired and maintained monopoly power as well as acted with the 26 specific intent to destroy competition. Moreover, Milk 27 Moovement’s allegation of Dairy’s market share is sufficient to 28 show that Dairy had a high probability of success in monopolizing 1 the market. See Cost Mgmt., 99 F.3d at 949-50. Accordingly, 2 Milk Moovement has alleged facts sufficient to support a claim 3 for monopolization and attempted monopolization under § 2 of the 4 Sherman Act. 5 E. Sherman Act § 1 (Claim 7) 6 In addition to its § 2 conspiracy claim, Milk Moovement 7 asserts a conspiracy claim under § 1 of the Sherman Act. 8 “Section 1 ‘targets concerted anticompetitive conduct, [whereas] 9 [Section 2] targets independent anticompetitive conduct.’” 10 Optronic, 20 F.4th at 481 (citation omitted). Section 1 of the 11 Sherman Act provides: “Every contract, combination in the form of 12 trust or otherwise, or conspiracy, in restraint of trade or 13 commerce among the several States, or with foreign nations, is 14 declared to be illegal.” 15 U.S.C. § 1.17 To state a claim under 15 § 1, a plaintiff must show: “(1) a contract, combination or 16 conspiracy; (2) ‘that unreasonably restrained trade . . . ; and 17 (3) that restraint affected interstate commerce.’” Optronic, 20 18 F.4th at 479 (citation omitted). 19 Here, the court finds Milk Moovement’s allegations are 20 sufficient to support a conspiracy claim under § 1. Milk 21 17 “Although on its face, Section 1 appears to outlaw 22 virtually all contracts, it has been interpreted as ‘outlaw[ing] only unreasonable restraints’ of trade.” In re Nat’l Football 23 League’s Sunday Ticket Antitr. Lit., 933 F.3d 1136, 1149-50 (9th Cir. 2019) (quoting State Oil Co. v. Khan, 522 U.S. 3, 10 24 (1997)). “Because § 1 . . . only [prohibits] restraints effected by a contract, combination, or conspiracy, the crucial question 25 is whether the challenged anticompetitive conduct stems from an independent decision or from an agreement, tacit or express.” 26 Twombly, 550 U.S. at 553 (citations and internal quotations omitted); see Optronic, 20 F.4th at 479 (“To establish a 27 conspiracy, the available evidence must tend ‘to exclude the possibility that the alleged conspirators acted independently.’”) 28 (citation and internal quotations omitted). 1 Moovement alleges that DFA is both a co-founder and owner of 2 Dairy and will not work with Dairy’s competitors. (2d. Am. 3 Countercls. ¶ 94.) As both a milk producer and milk processor, 4 DFA is not only motivated to suppress milk prices, but also their 5 market share in fact enables it to manipulate FMMOs and milk 6 prices. (Id. ¶ 114.) Moreover, Milk Moovement alleged that 7 evidence produced in prior litigation showed DFA had accessed 8 competing producers’ pricing data in an effort to manipulate milk 9 prices. (Id. ¶ 120.) By allegedly suppressing milk prices, DFA 10 prevents other milk producers, who may seek data processing 11 services from a Dairy competitor, from growing in the market for 12 milk production. As a result, Dairy can “leverage [its] monopoly 13 to prevent other market participants . . . from reaching scale as 14 a viable competitor.” (Id. ¶ 223.) 15 The court finds these allegations constitute “enough 16 fact to raise a reasonable expectation that discovery will reveal 17 evidence of illegal agreement.” Name.Space, Inc. v. Internet 18 Corp. for Assigned Names & Numbers, 795 F.3d 1124, 1129 (9th Cir. 19 2015) (quoting Twombly, 550 U.S. at 556). Accordingly, Milk 20 Moovement has alleged facts sufficient to support a claim for 21 conspiracy to monopolize under § 1 of the Sherman Act. 22 F. Cartwright Act (Claim 8) 23 Milk Moovement also asserts a claim under California’s 24 Cartwright Act. The Cartwright Act is California’s antitrust 25 law. See Cal. Bus. & Prof. Code §§ 16700 et seq. The Cartwright 26 Act “bans agreements that ‘prevent competition in . . . [the] 27 sale or purchase of . . . any commodity.’” Pacific Steel, 600 F. 28 Supp. 3d at 1080 (quoting Cal. Bus. & Prof. Code § 16720(c)). 1 The inquiry under the Cartwright Act is similar to that under 2 Section 1 of the Sherman Act. See Jain Irrigation, Inc. v. 3 Netafirm Irrigation, Inc., 386 F. Supp. 3d 1308, 1314 (E.D. Cal. 4 2019) (Drozd, J.) (“[T]he analysis under [the Cartwright Act] 5 ‘mirrors the analysis under Federal Law because the Cartwright 6 Act . . . was modeled after the Sherman Act.”) (quoting Cnty of 7 Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1160 (9th Cir. 8 2001)) (additional citation omitted). Here, as already 9 discussed, Milk Moovement has alleged facts sufficient to support 10 a claim under § 1 of the Sherman Act. Accordingly, it has also 11 sufficiently alleged its claim under the Cartwright Act. 12 G. Clayton Act § 7 (Claim 9) 13 Milk Moovement asserts a claim for unlawful mergers and 14 acquisitions under § 7 of the Clayton Act. “Section 7 [of the 15 Clayton Act] prohibits mergers that tend ‘substantially to lessen 16 competition’ or ‘create a monopoly.’” Optronic, 20 F.4th at 485 17 (citing 15 U.S.C. § 18). “To establish a prima face [Section 7] 18 case, [a plaintiff] must (1) propose the proper relevant market 19 and (2) that that the effect of the merger in that market is 20 likely to be anticompetitive.” Id. (citation and quotations 21 omitted); see Saint Alphonsus Med. Ctr.-Nampa Inc. v. Saint 22 Luke’s Health Sys. Ltd., 778 F.3d 775, 788 (9th Cir. 2015) 23 (“Section 7 does not require proof that a merger or other 24 acquisition has caused higher prices in the affected market. All 25 that is necessary is that the merger create an appreciable danger 26 of such consequences in the future.”) (citation and quotations 27 omitted). “[T]he anticompetitive effect of [a] merger is further 28 enhanced by high barriers to market entry.” FTC v. H.J. Heinz 1 Co., 246 F.3d 708, 718 (D.C. Cir. 2001) (explaining that high 2 barriers to entry “eliminates the possibility that the reduced 3 competition caused by the merger will be ameliorated by new 4 competition from outsiders”); see also Saint Alphonsus Med., 778 5 F.3d at 788. 6 Here, Milk Moovement alleges that Dairy’s various 7 acquisitions of competing supply-chain software products and 8 services, including of Data Specialists, Inc. and Ever.Ag, 9 “substantially lessened competition in the market for data 10 services to milk producers and processors in the United States . 11 . . .” (2d Am. Countercls. ¶ 258.) Moreover, Milk Moovement 12 alleges that Dairy terminated competition through acquisitions by 13 purchasing United Dairymen’s competing software system, but never 14 bringing it to market. (Id. ¶ 155.) 15 As already discussed, Milk Moovement has sufficiently 16 pled a relevant market. The court also found plausible Milk 17 Moovement’s allegations that the relevant market has high 18 barriers to entry, that Dairy’s market power exceeds 80 percent, 19 and that the companies Dairy acquired were competitors. Because 20 these acquisitions limit the amount of available software 21 providers in a market with high entry barriers, see H.J. Heinz 22 Co., 246 F.3d at 718, the court finds it plausible that these 23 acquisitions further concentrate an already concentrated market. 24 Thus, the effect of the acquisitions “is likely to be 25 anticompetitive.” See Optronic, 20 F.4th at 485. Accordingly, 26 Milk Moovement has alleged facts sufficient to support a claim 27 under § 7 of the Clayton Act. 28 H. UCL (Claim 10) nen ne enn mean en nn nnn nnn en nn ee enn nn nen nn on ne I NO OE EE 1 Finally, Milk Moovement asserts a claim under 2 California’s UCL. “California’s UCL[] prohibits ‘any unlawful, 3 unfair, or fraudulent business act or practice.’ This cause of 4 action is generally derivative of some other illegal conduct or 5 fraud . . .”). Castaneda v. Saxon Mortg. Servs., Inc., 687 F. 6 | Supp. 2d 1191, 1202 (E.D. Cal. 2009) (Shubb, J.) (quoting Cel- 7 Tech Comme’ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 8 187 (1999)). Here, Milk Moovement’s asserts its UCL claim for 9 | Dairy’s alleged violations of the Sherman Act and Clayton Act. 10 (Id. 97 263.) Because Milk Moovement has adequately pled its 11 antitrust claims, it has also adequately pled its unfair 12 competition claim. See Name.Space, 795 F.3d at 1134 (“Statutory 13 liability can be premised on antitrust or trademark 14 | violations.”). 15 For the reasons stated above, the court finds that Milk 16 | Moovement has plausibly alleged facts sufficient to support its 17 counterclaims for conspiracy to monopolize under § 2 of the 18 Sherman Act, monopolization and attempted monopolization under § 19 2 of the Sherman Act, unlawful restraint of trade under § 1 of 20 the Sherman Act, unlawful restraint of trade under California’s 21 Cartwright Act, unlawful mergers or acquisitions under § 7 of the 22 Clayton Act, and unfair competition under California’s UCL. 23 IT IS THEREFORE ORDERED that Dairy’s motion to strike 24 (Docket No. 270) and motion to dismiss (Docket No. 266) be, and 25 the same hereby are, DENIED. 26 | Dated: May 12, 2023 pete . 4h. Ag Le 27 WILLIAM B. SHUBB 38 UNITED STATES DISTRICT JUDGE 36