Ahn v. Stewart Title Guaranty Co. ( 2023 )

Filed 7/5/23
CERTIFIED FOR PUBLICATION
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
STEVE AHN, D080391
Plaintiff and Appellant,
v. (Super. Ct. No. 37-2019-00014641-
CU-WT-CTL)
STEWART TITLE GUARANTY
COMPANY,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of San Diego County,
Richard S. Whitney, Judge. Affirmed.
Wingert Grebing Brubaker & Juskie, Stephen C. Grebing, and Camille
E. Kollar for Plaintiff and Appellant.
Best Best & Krieger and Matthew L. Green for Defendant and
Respondent.
Amidst a corporate merger, a sales executive is told there are
limitations on how he can compete for the merging partner’s clients. He loses
sales commissions and is terminated for poor sales performance. Does he
have standing to assert a cause of action under the Cartwright Act,
California’s antitrust statute? (Bus. & Prof. Code,1 § 16700 et seq.) On the
particular facts alleged in this case, the answer is clearly no.
Ahn was a sales executive for a title insurer who claims his sales
figures were adversely affected when his employer barred him from using a
particular sales pitch to solicit customers from a competitor who was also a
proposed corporate merger partner. Ahn’s pitch told prospective clients that
after the proposed merger was finalized, they would have no choice but to
comply with his company’s higher-cost, less flexible underwriting standards.
He attempted to use this pitch to convince these clients to abandon the
competitor before the merger.
But a plaintiff suing under the Cartwright Act must suffer “ ‘antitrust
injury,’ ” which in turn requires harm that “stem[s] from the anticompetitive
aspect of [defendants’] alleged conduct.” (Cellular Plus, Inc. v. Superior Court
(1993) 14 Cal.App.4th 1224, 1235 (Cellular Plus).) Accepting Ahn’s claim
that the two merging entities agreed not to fully compete for each other’s
customers while their merger was pending, Ahn does not claim injury from
the alleged anticompetitive aspects of this agreement, but rather from
conduct that emphasized their competitive differences. A complaint that he
could not lure customers with a pitch about their restricted postmerger
options does not constitute an antitrust injury, meaning Ahn lacks standing
to sue under the Cartwright Act. We find an alternative ground to affirm
1 Further undesignated statutory references are to the Business and
Professions Code.
2
based on Ahn’s concession at oral argument that Fidelity and Stewart
attempted to merge in good faith, and had the merger gone through, his
Cartwright Act claim would be barred under Asahi Kasei Pharma Corp. v.
CoTherix, Inc. (2012) 204 Cal.App.4th 1 (Asahi). The mere circumstance that
the merger was not consummated is not enough to distinguish this case from
Asahi.
Our conclusion that Ahn cannot demonstrate an antitrust violation
affects his derivative economic relations tort claims, both of which require
independently wrongful conduct. Concluding the trial court did not err in
granting summary judgment, we therefore affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
A. Background and Claims Against Stewart
Developers of wind, solar, and renewable energy projects must obtain
title insurance securing the land and improvements used in a project in order
to obtain financing for necessary infrastructure (wind turbines, solar panels,
etc.).2 Title insurance protects lenders and purchasers from defects in the
property’s title. Because these infrastructure projects are usually built on
undeveloped rural land, a major aspect of obtaining title insurance involves
getting waivers from owners of subsurface mineral rights. For many rural
parcels, subsurface mineral rights were sold a long time ago to mining
companies or oil and gas developers. Current landowners may be unsure if
mineral rights were ever sold, who bought them, and who currently holds
these interests. Once the current interest holders are identified and located,
developers must obtain waivers, which is a difficult and time-consuming
2 We draw background facts from the operative complaint and its cross-
referenced administrative complaint by the Federal Trade Commission (FTC)
solely for context.
3
process. Thus, “title issues for these parcels can be highly complex and a title
issue with even one parcel may impact the entire renewable energy project.”
Four underwriters, known as the “Big 4,” dominate the title insurance
industry across the United States. Fidelity National Financial, Inc. (Fidelity)
and Stewart Title Guaranty Company (Stewart) are two members of the Big
4 and horizontal competitors. In the renewable energy title insurance
market, Stewart competed for business with Fidelity’s wholly owned
subsidiary, Chicago Title.
Ahn previously worked as a senior account executive at Stewart for
fifteen years. In 2014, Chicago Title recruited him as their Vice President for
Energy Services “for the specific purpose of competing with Stewart’s title
business in renewable energy.” Ahn found it difficult to compete with
Stewart given Fidelity’s “more stringent underwriting policies concerning
surface waivers from the holders of mineral rights.” Fidelity generally
required a developer to obtain waivers from 100 percent of the holders of
subsurface mineral rights as a condition to providing title insurance, and
rarely granted exceptions. Stewart, on the other hand, had looser
underwriting standards and would provide insurance coverage so long as
developers secured waivers from 51 percent or more of the mineral rights
holders. These differences in underwriting standards offered “a significant
competitive advantage to Stewart and made convincing clients to switch from
Stewart to Fidelity very difficult.” Few of Ahn’s new clients at Chicago Title
had moved over from Stewart.
In March 2018, Fidelity announced a tentative merger with Stewart,
subject to shareholder and regulatory approval. Ahn would later allege that
Fidelity and Stewart agreed during the premerger period not to compete for
each other’s clients and to allocate their customers. He believed he was fired
4
for attempting to actively compete with Stewart for clients during this
premerger period. The specific sales pitch he sought to make, which compels
our conclusion that he lacks antitrust standing, is discussed further below.
The merger ultimately did not go through. In September 2019, the
FTC challenged it because the proposed merger would concentrate the Big 4
into three main players.3 The FTC alleged this consolidation was “likely to
result in anticompetitive harm.” Beyond losing one of four competitors in the
market, the FTC was concerned that Stewart, in particular, had “earned a
reputation among market participants for being more creative and flexible in
providing title insurance—to the benefit of its customers—and for selling title
insurance at lower prices than the other Big 4 underwriters.” More
specifically,
“Stewart has shown a greater willingness to undercut the
other Big 4 underwriters on price, or offer more favorable
coverage terms, in order to win business. Even within this
four-firm ‘oligopoly,’ Fidelity has been forced to reduce its
prices in response to Stewart. Stewart also finds creative
ways to mitigate or assume risk in order to compete for
business and has been willing to provide coverage where
Fidelity and others in the Big 4 have declined to do so
unless the customers can meet additional burdensome
conditions. Where the current oligopoly has already
softened competition, Stewart’s approach has prompted
others in the Big 4 to adjust their own competitive
strategies to the benefit of customers.”
In the FTC’s view, neither Stewart nor Fidelity had demonstrated that the
merger would yield efficiencies that would counteract anticipated competitive
harm to consumers. Following the FTC’s complaint, Fidelity and Stewart
abandoned their merger attempt.
3 Ahn was terminated in November 2018, ten months before the FTC
filed an administrative complaint challenging the proposed merger.
5
Ahn sued his employer Chicago Title, its parent Fidelity, Fidelity’s
Executive Vice President Dan DuBois, and Stewart. He filed his operative
First Amended Complaint after the FTC complaint. Only the claims against
Stewart are relevant to this appeal. Ahn alleged that Stewart violated the
Cartwright Act by conspiring with Fidelity and Chicago Title “to curtail and
restrict competition between Fidelity/Chicago and Stewart in wind, solar and
renewable energy projects.” He asserted that the companies “agreed to
allocate customers such that Fidelity would not compete for Stewart’s
customers” pending the merger. The purpose behind this arrangement, in
Ahn’s view, was to maintain Stewart’s market share, earnings, and customer
base while the merger was pending. He further accused Stewart of tortiously
interfering with his contractual relations and interfering with his prospective
economic advantage, with these tort causes of action resting on an alleged
antitrust violation to show independently wrongful conduct.
In other words, Ahn’s three causes of action against Stewart rose or fell
on his antitrust claim. That claim, in turn, was predicated on efforts by
Fidelity and Stewart to restrain Ahn’s sales tactics as follows.
Soon after the merger was announced in 2018, Ahn was told by Joe
Goodman, his supervisor at Chicago Title, that Stewart would likely have to
conform postmerger to Fidelity’s tighter underwriting guidelines—i.e.,
waivers would be required from all rather than half of subsurface mineral
rights holders. Ahn saw this as an opportunity to compete for Stewart’s
customers. As he put it in the complaint: “If Stewart had to meet
Chicago/Fidelity’s more stringent underwriting standards, this would end
Stewart’s competitive advantage and open the door for Ahn to convince his
old book of business (and other renewable developers) to choose Ahn, and
therefore Chicago, over Stewart.” Thus, in an attempt to lure Stewart clients
6
to Chicago, Ahn began telling them about the anticipated merger “and
looming underwriting parity between Stewart and Chicago/Fidelity.”
To Ahn’s surprise, his active efforts to compete for clients with this
pitch were met with internal hostility at Chicago Title. Ahn was told not to
send public notices about the merger to Stewart’s clients. With Goodman’s
approval, however, Ahn continued his outreach. As several large clients
began to express interest in moving their projects from Stewart to Chicago
Title, senior executives at both companies grew concerned. In a May 2018 e-
mail exchange attached to the complaint, Dawn Anderson, a senior
underwriter at Stewart, expressed concern that Ahn was telling a major wind
farm client about impending postmerger underwriting shifts at Stewart.
Because of Ahn’s outreach to that client, Anderson wrote that her team
risked losing a project they had spent months on. Anderson’s e-mail made its
way up the chain at Stewart and was passed onto Fidelity executives, who
internally commented on “issues with Steve Ahn.” DuBois told Goodman
that Stewart’s complaint about Ahn was “more than concerning,” noting it
would be a “big problem” if Ahn was still discussing the merger with
Stewart’s clients. Feeling he was in “[h]ot water” from Ahn’s conduct,
Goodman told Ahn to “stand down” and not mention the merger or
anticipated underwriting changes to prospective clients.
Ahn alleged that these restrictions were designed to prevent him from
competing with Stewart for clients, in furtherance of the companies’ alleged
premerger conspiracy. Had he been allowed to compete in the manner he
desired, Ahn believed he would have brought several Stewart customers over
to Chicago Title. Stewart’s shareholders approved the merger in October
2018. Ahn circulated the associated press releases to prospective clients with
Goodman’s authorization. But six days later, he was abruptly terminated.
7
B. Summary Judgment Proceedings4
Stewart moved for summary judgment. (Code Civ. Proc., § 437c.) As to
the Cartwright Act, it argued Ahn lacked standing, citing Vinci v. Waste
Management, Inc. (1995) 36 Cal.App.4th 1811 (Vinci) for the proposition that
losing a job was not the type of injury the Act sought to rectify. Stewart also
maintained that Ahn could not prove any anticompetitive agreement between
it and Fidelity. Finally, Stewart asserted that the Cartwright Act claim
failed on the merits because, under Asahi, supra, 204 Cal.App.4th 1, the Act
did not cover premerger coordination.
As Stewart explained, Ahn’s remaining economic tort causes of action
required some type of independently wrongful act. (Ixchel Pharma, LLC v.
Biogen, Inc. (2020) 9 Cal.5th 1130, 1142, 1148 (Ixchel).) Because Ahn could
not state an antitrust claim, Stewart contended these derivative tort claims
likewise failed. Moreover, Stewart claimed, those causes of action failed for
lack of causation because Chicago Title terminated Ahn for legitimate
performance-based reasons.
Opposing the motion, Ahn distinguished Vinci as a case where the
plaintiff had not been terminated to further an anticompetitive scheme. In
Ahn’s view, factual issues precluded summary judgment as to whether
communications between Stewart and Fidelity executives suggested a
premerger conspiracy to restrain competition. Likewise, Ahn claimed factual
issues existed as to whether Stewart tortiously interfered with his
employment relationship.
The parties appeared before Judge Richard Whitney in March 2022.
Arguing against the tentative ruling in favor of Stewart, Ahn’s counsel
4 Because this case ultimately turns on questions of law raised on
summary judgment, we need not dwell on the parties’ factual submissions.
8
claimed Vinci, supra, 36 Cal.App.4th 1811 applied the incorrect federal
antitrust standard to reject standing whereas the Cartwright Act expressly
allowed indirect market participants to sue.5 As for the tort claims, Ahn
contended that Ixchel required an independent wrong to prove tortious
interference with contract in order to protect business competition. He
claimed the requirement did not apply given Stewart’s anticompetitive
actions here.
The trial court rejected these arguments. Citing Vinci, supra, 36
Cal.App.4th 1811 determined that Ahn lacked standing because he had less
incentive than Stewart’s market competitors to vindicate the public’s interest
in antitrust enforcement. Even otherwise, the court concluded on the merits
that the Cartwright Act applied to neither mergers nor premerger
5 In Illinois Brick Co. v. Illinois (1977) 431 U.S. 720, the United States
Supreme Court barred indirect purchasers from bringing federal antitrust
damages claims. In response, the California Legislature amended section
16750, subdivision (a) to allow indirect purchaser claims under the
Cartwright Act. (See Union Carbide Corp. v. Superior Court (1984) 36 Cal.3d
15, 20−22.) Since Illinois Brick, federal courts have developed a multifactor
test for evaluating antitrust standing under the Sherman Act. (See
Associated General Contractors v. Cal. State Council of Carpenters (1983) 459
U.S. 519, 537−544 (AGC).) These so-called “AGC factors” consider among
other things whether there are more direct victims who can challenge the
alleged antitrust violation. Despite the Cartwright Act’s express extension to
indirect purchasers, one intermediate appellate court applied the AGC factors
to dismiss a case brought by a terminated plaintiff for lack of standing.
(Vinci, supra, 36 Cal.App.4th at pp. 1814−1817.) After Vinci was decided, the
California Supreme Court confirmed in Aryeh v. Canon Business Solutions
(2013) 55 Cal. 4th 1185, 1195 (Aryeh) that federal antitrust standards “are at
most instructive, not conclusive, when construing the Cartwright Act” given
their distinct origins. Ahn argued below and on appeal that Aryeh and this
court’s standing analysis in Cellular Plus, supra, 14 Cal.App.4th 1224undermine Vinci’s reasoning. For reasons we explain, we need not reach this
question to resolve this appeal.
9
coordination, unless the merger was a sham to facilitate cartel behavior.
Because Ahn had not provided evidence suggesting the proposed merger was
a sham, the court concluded he lacked standing under Asahi, supra, 204
Cal.App.4th at page 16. Turning to the tort claims, the court noted that they
rested on a Cartwright Act violation for the requisite independently wrongful
conduct. Because Ahn could not assert a violation under the Cartwright Act,
it reasoned he could likewise not raise a question of fact as to whether
Stewart did anything independently wrongful. Accordingly, it granted the
motion for summary judgment and entered judgment for Stewart.
DISCUSSION
In evaluating Ahn’s appeal on summary judgment, we focus largely on
the issue of antitrust standing. The trial court found that Ahn lacked
standing because there were more direct claimants who could sue. On de
novo review (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860
(Aguilar)), although we agree that Ahn lacks standing to sue under the
Cartwright Act, we do so based on the separate antitrust injury requirement.
(See Securitas Security Services USA, Inc. v. Superior Court (2011) 197
Cal.App.4th 115, 120 [“We will affirm an order granting summary judgment
or summary adjudication if it is correct on any ground that the parties had an
adequate opportunity to address in the trial court, regardless of the trial
court’s stated reasons.”].)
Ahn claims he was injured because he himself could not hinder
competition with a sales pitch to lure Stewart customers to Chicago Title.
Because this is not the type of injury the Cartwright Act seeks to protect, he
lacks antitrust standing. We further conclude Ahn’s Cartwright Act cause of
action fails on the merits given his concession at oral argument that his claim
would be barred under Asahi had the merger between Fidelity and Stewart
10
gone through. Our conclusion that Ahn cannot state an antitrust claim
prevents him from demonstrating a triable issue as to either of his derivative
business tort claims, which require proof of an independently wrongful act.
As a result, summary judgment was properly granted.
A. Standing under the Cartwright Act requires an antitrust injury.
The Cartwright Act (§§ 16700−16770) is California’s principal antitrust
statute. It “ ‘generally outlaws any combinations or agreements which
restrain trade or competition or which fix or control prices.’ ” (Pacific Gas &
Electric Co. v. County of Stanislaus (1997) 16 Cal.4th 1143, 1147.) The Act
serves “overarching goals of maximizing effective deterrence of antitrust
violations, enforcing the state’s antitrust laws against those violations that
do occur, and ensuring disgorgement of any ill-gotten proceeds.” (Clayworth
v. Pfizer (2010) 49 Cal.4th 758, 763−764.) Broadly speaking, the Cartwright
Act is premised on the notion that competition yields efficient resource
allocation, lower prices, higher quality, and greater social welfare. (In re
Cipro Cases I & II (2015) 61 Cal.4th 116, 136 (Cipro).) “At its heart is a
prohibition against agreements that prevent the growth of healthy,
competitive markets for goods and services and the establishment of prices
through market forces.” (Ibid.)6
6 The Sherman Act is the Cartwright Act’s federal counterpart.
“Sections 1 and 2 of the Sherman Act, 15 U.S.C. . . . are broadly worded
statutes designed to counter restraints of trade and monopolistic practices;
but are actionable by private individuals only through Sections 4 and 16 of
the Clayton Act, 15 U.S.C. §§ 15 & 26. Section 4 of the Clayton Act allows
private enforcement of the antitrust laws through a treble damages action by
‘any person who shall be injured in his business or property by reason of
anything forbidden in the antitrust laws[.]’ 15 U.S.C. § 15.” (Re/Max Int’l v.
Realty One, Inc. (N.D.Ohio 1995) 900 F.Supp. 132, 145.)
11
The primary substantive provision of the Cartwright Act is found in
section 16720, which prohibits a “trust,” defined as “a combination of capital,
skill, or acts by two or more persons” for such purposes as price-fixing,
exclusive dealing, or restraints on trade or commerce or competition. As it
relates to Ahn’s claims, “businesses may not engage in a horizontal allocation
of markets, with would-be competitors dividing up territories or customers.”
(Cipro, supra, 61 Cal.4th at p. 148.) Except as otherwise provided by statute,
“every trust is unlawful, against public policy and void.” (§ 16726.)
Although framed in absolute language, “deciding antitrust illegality is
not as simple as identifying whether a challenged agreement involves a
restraint of trade.” (Cipro, supra, 61 Cal.4th at pp. 145−146.) Only
unreasonable restraints of trade are prohibited, so the “rule of reason”
generally asks whether the challenged conduct on balance promotes or
suppresses competition. (Id. at p. 146.) Certain categories of agreements or
practices are deemed per se illegal (ibid.), eliminating the need for elaborate
market analysis to evaluate any anticompetitive effects. (Marsh v.
Anesthesia Services Medical Group, Inc. (2011) 200 Cal.App.4th 480, 494
(Marsh).) Ahn alleges a horizontal combination between Fidelity/Chicago
Title and Stewart to allocate or avoid competing for clients, an arrangement
that would be per se illegal. (Id. at p. 493.)
The Cartwright Act has a distinct origin from the Sherman Act (Aryeh,
supra, 55 Cal.4th at p. 1195), and there are notable differences between the
two schemes. Indirect purchasers lack standing under federal law, whereas
the Cartwright Act expressly allows indirect purchasers to sue. (See note 5,
ante.) Mergers are covered under federal antitrust law but not under the
Cartwright Act. (State of California ex rel. Van de Kamp v. Texaco, Inc.
(1988) 46 Cal.3d 1147, 1163 (Texaco).) In addition, because the Cartwright
Act contains no analogue to the antimonopoly provision found in section 2 of
the Sherman Act, “single firm monopolization is not cognizable under the
Cartwright Act.” (Asahi, supra, 204 Cal.App.4th at p. 8.)
12
The essential elements of an antitrust claim under the Cartwright Act
are an unlawful agreement, wrongful acts committed pursuant to it, and
damages. (Marsh, supra, 200 Cal.App.4th at p. 493.) A proper plaintiff may
sue to recover treble damages and injunctive relief. (§ 16750, subd. (a).)
Section 16750, subdivision (a) confers standing on “any person who is injured
in his or her business or property by reason of anything forbidden or declared
unlawful by this chapter, regardless of whether such injured person dealt
directly or indirectly with the defendant.” A key component of analyzing
antitrust standing is determining whether a plaintiff suffered an “antitrust
injury.”
The antitrust injury requirement derives from the United States
Supreme Court decision in Brunswick Corp. v. Pueblo Bowl–O–Mat, Inc.
(1977) 429 U.S. 477 (Brunswick). (See Flagship Theatres of Palm Desert,
LLC v. Century Theatres, Inc. (2011) 198 Cal.App.4th 1366, 1378 (Flagship).)
The plaintiffs in Brunswick sued a defendant under the Sherman Act,
alleging that it had acquired failing bowling alleys, thereby preserving
competition in the market and depriving plaintiffs of the profits they
otherwise stood to make had competition been reduced. (Brunswick, at
p. 488.) The Supreme Court held that the plaintiffs lacked standing because
they had not suffered an injury “of the type the antitrust laws were intended
to prevent and that flows from that which makes defendant’s acts unlawful.”
(Id. at p. 489.) California courts have since extended this requirement to the
Cartwright Act, notwithstanding other differences between the two schemes.
13
(See Kolling v. Dow Jones & Co. (1982) 137 Cal.App.3d 709, 723 (Kolling);
Cellular Plus, supra, 14 Cal.App.4th at p. 1234.7)
The purpose of requiring antitrust injury is to “ensure[ ] that the harm
claimed by the plaintiff corresponds to the rationale for finding a violation of
the antitrust laws in the first place, and it prevents losses that stem from
competition from supporting suits by private plaintiffs for either damages or
equitable relief.” (Atlantic Richfield, supra, 495 U.S. at p. 342.) Accordingly,
“a plaintiff can recover only if the loss stems from a competition-reducing
aspect or effect of the defendant’s behavior.” (Id. at p. 344, italics added;
accord Flagship, supra, 198 Cal.App.4th at pp. 1379−1380 [“an antitrust
plaintiff must show that it was injured by the anticompetitive aspects or
effects of the defendant’s conduct, as opposed to being injured by the
conduct’s neutral or even procompetitive aspects (as in Brunswick)”].) “If the
injury flows from aspects of a defendant’s conduct that are beneficial or
neutral to competition, there is no antitrust injury, even if the defendant’s
7 Standing involves two separate inquiries in antitrust cases—first,
whether a plaintiff suffered an antitrust injury, and second, whether that
plaintiff is the proper enforcer to sue for antitrust violations. (Todorov v.
DCH Healthcare Authority (11th Cir. 1991) 921 F.2d 1438, 1449 (Todorov).)
Cellular Plus seems to have merged the two concepts together in suggesting
that antitrust injury is broader under state law than federal law. (Cellular
Plus, supra, 14 Cal.App.4th at p. 1234.) While the Cartwright Act indeed
allows broader standing in a sense by letting indirect victims sue (see note 5,
ante), the antitrust injury requirement remains the same across state and
federal law. (See Kolling, supra, 137 Cal.App.3d at p. 723 [relying on
Brunswick to define antitrust injury]; Cellular Plus, at p. 1234 [same, also
relying on subsequent clarifying language in Atlantic Richfield Co. v. USA
Petroleum Co. (1990) 495 U.S. 328, 340−341 (Atlantic Richfield)].) Although
Ahn addressed antitrust injury in his briefs and cited relevant case authority,
we issued a focus letter before oral argument directing the parties to
comment on how Ahn’s specific allegations comport with this standing
requirement.
14
conduct is illegal.” (Theme Promotions, Inc. v. News Am. Mktg. FSI (9th Cir.
2008) 546 F.3d 991, 1003.)
This court previously evaluated antitrust injury in Cellular Plus,
supra, 14 Cal.App.4th 1224. In that case, two groups of plaintiffs sued
licensed cell phone service providers (U.S. West and PacTel) over injuries
caused by defendants’ alleged price fixing scheme. Consumer-plaintiffs
alleged that they paid too much for cellular service as a result of price fixing,
whereas corporate sales agents alleged that price fixing resulted in
artificially high prices, costing them sales. We concluded that both groups of
plaintiffs had standing under the Cartwright Act. (Id. at pp. 1234−1235.) As
to the sales agents, their alleged injuries were both “within the type section
16750 seeks to prevent and directly stem[med] from the ‘anticompetitive
aspect’ of U.S. West’s and PacTel’s alleged conduct.” (Cellular Plus, at
p. 1235.)
Applying that standard, the question is whether Ahn’s claimed injuries
were (1) of a type the antitrust laws were designed to prevent, and (2) flowed
from the anticompetitive nature of Stewart’s conduct.
B. Ahn cannot show he suffered an antitrust injury.
Examining the allegations in the operative complaint, we reach a
different conclusion than in Cellular Plus. Here, the undisputed facts show
Ahn did not suffer the requisite antitrust injury for Cartwright Act standing.
For reasons we explain, he cannot show that his lost sales or termination
stemmed from a competition-reducing aspect of Stewart’s behavior. Instead,
it was Ahn who attempted to profit from the competition-reducing market
consolidation aspects of the proposed merger. Stewart may have prevented
him from doing so, allegedly costing him sales and his job, but this harm did
not amount to an antitrust injury.
15
“The purpose of the law of summary judgment is to provide courts with
a mechanism to cut through the parties’ pleadings in order to determine
whether, despite their allegations, trial is in fact necessary to resolve their
dispute.” (Aguilar, supra, 25 Cal.4th at p. 843.) It necessarily follows that
the pleadings frame the issues on a motion for summary judgment. (Conroy
v. Regents of University of California (2009) 45 Cal.4th 1244, 1250 (Conroy).)
“[T]he burden of a defendant moving for summary judgment only requires
that he or she negate plaintiff's theories of liability as alleged in the
complaint; that is, a moving party need not refute liability on some
theoretical possibility not included in the pleadings.” (Hutton v. Fidelity
National Title Co. (2013) 213 Cal.App.4th 486, 493.) Thus, in seeking
summary judgment on standing grounds, Stewart needed only to show that
Ahn lacked an antitrust injury based on the theory of liability alleged in his
complaint. In so doing, it could rely on the factual allegations in Ahn’s
complaint. (Castillo v. Barrera (2007) 146 Cal.App.4th 1317, 1324 [collecting
cases].) Evaluating that question of law on de novo review, we conclude Ahn
lacked standing to sue.
Ahn alleges that Fidelity and Stewart entered into a horizontal market
allocation agreement not to actively compete for each other’s clients. On its
own, this suggests a market division, a per se violation of the Cartwright Act.
(Marsh, supra, 200 Cal.App.4th at p. 493.) As the FTC complaint indicated,
the title insurance market already reflected significant consolidation, with
Stewart offering creative, flexible underwriting competition to Fidelity,
benefiting customers with lower prices. Had Ahn sued because he was
prevented from contacting Stewart customers altogether, this restraint would
stem from the anticompetitive nature of the alleged market division. But this
is not what Ahn alleged or what the evidence showed.
16
Instead, Ahn sued under a theory that he was precluded from luring
Stewart customers with the pitch that the proposed merger with Fidelity
would reduce existing choice in the market. He tried to convince Stewart’s
customers that postmerger, they would have to conform to Fidelity’s more
stringent underwriting requirements. In effect, Ahn was telling Stewart
customers that the market was about to have only one underwriting choice—
the more stringent standards and more expensive option of Fidelity—which
would require waivers from all holders of subsurface mineral rights to
underwrite the policy. Rather than risk a chance of not meeting those more
stringent standards later, Ahn urged customers to preemptively switch to
Chicago Title by anticipating the eventual loss of competitive choice. In so
doing, Ahn pleaded his way out of being able to show the requisite antitrust
injury.
“This is not the first time a plaintiff has tried to use the antitrust laws
as a means to gain benefits based on anticompetitive conduct.” (Todorov,
supra, 921 F.2d at p. 1454.) Several federal cases support our conclusion that
Ahn did not suffer an antitrust injury. The “ ‘central evil’ ” addressed by the
antitrust laws is the elimination of competition that would otherwise exist.
(Am. Needle, Inc. v. National Football League (2010) 560 U.S. 183, 195,
quoting 7 P. Areeda & H. Hovenkamp, Antitrust Law (2d ed. 2003) P1462b,
193–194.) “[T]he Cartwright Act, like all antitrust laws, is about the
protection of competition, not competitors.” (Asahi, supra, 204 Cal.App.4th at
p. 20, internal quotation marks omitted.) Where, as here, a plaintiff seeks to
join rather than disrupt anticompetitive behavior, there is no antitrust
injury.
For example, in Top Agent Network, Inc. v. Nat’l Ass’n. of Realtors
(N.D.Cal. 2021) 554 F.Supp.3d 1024, a real estate agent network challenged a
17
trade association policy preventing it from marketing exclusive homes
privately off the multiple listing service (MLS). (Id. at pp. 1026−1027, 1029.)
While the complaint plausibly alleged that the association’s policy had
anticompetitive effects in limiting competition for off-MLS sales, the network
had “failed to state an antitrust injury because its alleged harm—the loss of
agent members—does not flow from effects of the Policy that are harmful to
competition.” (Id. at p. 1032.) Instead, the network itself sought to profit off
an anticompetitive business model that decreased competition for exclusive
listings. (Id. at pp. 1032−1033.) As the court explained, “one of the virtues of
the antitrust standing analysis is that it prevents such a plaintiff from
deploying antitrust law as a shield for its own anticompetitive injuries.”
(Id. at pp. 1034−1035.)
A similar result was reached in Local Beauty Supply, Inc. v. Lamaur,
Inc. (7th Cir. 1986) 787 F.2d 1197. Local, a distributor of beauty supply
products, was terminated by a manufacturer named Lamaur after other
distributors complained about Local’s sales practices. Accepting Local’s
premise that alleged price-fixing between Lamaur and other distributors
violated antitrust laws, the court held that Local could nevertheless not
demonstrate antitrust injury. (Id. at pp. 1200−1202.) Citing Brunswick,
supra, at page 488, it reasoned that Local did not suffer antitrust injury
because its damages did not “ ‘flow from that which makes the defendants’
acts unlawful.’ ” Instead, Local was damaged by its “inability to continue to
profit from the anticompetitive nature of the violation”—Local’s interests
were in fact “disserved by enhanced competition.” (Local, at pp. 1202−1203.)
As the court concluded, “lost profits from the inability to continue to take
advantage of inflated prices due to antitrust conduct are not representative of
antitrust injuries . . . .” (Id. at p. 1203; see also Jack Walters & Sons Corp. v.
18
Morton Bldg., Inc. (7th Cir. 1984) 737 F.2d 698, 708 [“[a plaintiff] will not be
heard to complain about having to meet lawful price competition, which
antitrust law seeks to encourage, merely because the competition may have
been enabled by an antitrust violation”].)8
Drawing from these authorities, we conclude that Ahn cannot show he
suffered an antitrust injury as required to sue under the Cartwright Act.
While he points to the FTC complaint to suggest the proposed merger
between Fidelity and Stewart was anticompetitive, that is not the source of
his injury. He does not claim that he was barred from contacting Stewart
customers altogether as a result of a horizontal market allocation agreement
between Stewart and Fidelity. Instead, he claims Stewart blocked him from
using a particular sales pitch. Ahn tried to convince Stewart clients to switch
to Fidelity by claiming that they would no longer have a choice postmerger to
pick Stewart’s more flexible underwriting standards and lower costs. Ahn
may well have lost sales and been fired as a result, but this claimed injury
8 Other cases are similar. In Daniel v. Am. Bd. of Emergency Med. (2d
Cir. 2005) 428 F.3d 408, doctors challenged a certifying board’s control over
emergency room doctors. Even if the plaintiffs plausibly alleged supply
constraints, they could not show antitrust injury where the harm alleged was
denial of the opportunity to command the same super-competitive pay earned
by their certified colleagues. (Id. at pp. 438−439.) As the court reasoned,
“plaintiffs cannot themselves state an antitrust injury when their purpose is
to join the cartel rather than disband it.” (Id. at p. 440; see also Sanjuan v.
American Bd. of Psychiatry and Neurology (7th Cir. 1994) 40 F.3d 247, 251.)
19
flows from Ahn’s attempt to profit from the anticompetitive effects of the
proposed merger, and not from conduct the Cartwright Act seeks to protect.9
Ahn likens this case to Kolling, supra, 137 Cal.App.3d at page 724,
where the loss of a newspaper distributorship due to a publisher’s price-fixing
scheme was the type of injury the Cartwright Act meant to prevent. He also
draws comparisons to Cellular Plus, supra, 14 Cal.App.4th at page 1235,
where lost sales by sales agents affected by an alleged price-fixing scheme by
two cellular service companies sufficed to show antitrust injury. In his view,
losing his book of business was also the type of injury the antitrust laws
cover. The problem for Ahn is that these comparisons run only skin-deep.
On closer examination, neither the newspaper distributor in Kolling nor the
cell phone sales agents in Cellular Plus were trying to profit from
anticompetitive effects of the defendant’s conduct. These cases are
distinguishable and do not change our conclusion that Ahn’s theory of the
case is inconsistent with his having suffered an antitrust injury.10
9 Pressed at oral argument to explain how consumers were harmed when
Ahn was barred from making his pitch, counsel suggested that Stewart
customers might face project disruptions with midstream postmerger
underwriting changes. But project disruption is not the same thing as
antitrust injury. Ahn admits he sought to convert Stewart clients to a more
expensive, less flexible underwriting option by suggesting the market would
soon offer less consumer choice. This is not the type of harm the antitrust
laws protect against.
10 Much of the parties’ arguments before the trial court and on appeal
centered on the merits of Vinci, supra, 36 Cal.App.4th 1811, and whether a
loss of employment could support a claim under the Cartwright Act. In
concluding Ahn lacks standing because he cannot show an antitrust injury,
we express no view on these matters.
20
C. Ahn’s Cartwright Act claim fails on the merits.
The trial court concluded that the Cartwright Act did not apply to the
premerger activity challenged in this case. In its landmark Texaco decision,
the California Supreme Court concluded that unlike the Sherman Act, the
Cartwright Act applies only to entities that combine and perdure—i.e.,
“continue as separate, independent competing entities during and after the
collusive action.” (Texaco, supra, 46 Cal.3d at p. 1163.) It thus does not
“regulate the bona fide purchase and sale of one firm by another.” (Ibid.)
This rationale was extended to specified premerger activities in Asahi, supra,
204 Cal.App.4th 1.
Japanese pharmaceutical company Asahi sued California-based
CoTherix for halting marketing or development of Asahi’s licensed
hypertension drug upon CoTherix’s acquisition by competing pharmaceutical
company Actelion. Asahi challenged the company’s premerger activity under
the Cartwright Act. The court rejected that claim by extending the reasoning
of Texaco. Although Asahi disclaimed any challenge to the merger itself, the
court found it “difficult to see how our antitrust policies are furthered by
saying that parties may not, in the process of merging, reach agreement to do
that which the combined entity may freely do.” (Asahi, supra, 204
Cal.App.4th at p. 18.) Even before a merger formally closes, “independent
economic decisionmaking is compromised, even if not eliminated, once
companies have formally agreed to merge.” (Id. at p. 17.) Consequently, it
was difficult to see how premerger conduct incident to an otherwise valid
merger agreement could violate the Cartwright Act. (Id. at pp. 17−18.)
Asahi stands for the proposition that because the Cartwright Act does
not cover merger activity, it also does not extend to premerger activity that is
incidental to an otherwise valid merger agreement. Ostensibly, this holding
21
leaves open the possibility of a Cartwright Act claim based on premerger
conduct that is not incidental to a good faith agreement to merge. Finding no
evidence of this scenario, the trial court rejected Ahn’s Cartwright Act claim
on the merits. While Texaco and Asahi “do not address the exact
circumstances in this case, where a merger was not actually completed,” Ahn
had provided no evidence “of sham merger negotiations or cartel behavior.”
In the absence of this scenario, the court concluded “the Cartwright Act does
not apply to pre-merger activity where a merger agreement was in place.”
As the court explained, “the Cartwright Act is not furthered where the
entities fully intended to merge and they could have behaved as they did if
the merger had been completed.”11
Challenging this result, Ahn sought to distinguish Asahi on factual
grounds in his briefs. Because Fidelity and Stewart never merged, they
remained separate independent entities before and after the alleged collusive
behavior. Ahn noted that the proposed merger in Asahi had not been
challenged as unlawful.12 Whereas Asahi presumed that the companies
were acting in the economic interest of the postmerger entity, Ahn claimed
that Stewart’s actions “were motivated by the need to preserve the individual
interests of the company, not to further the merger.” In Ahn’s view, Stewart
11 Reaching the same conclusion on the summary judgment motion filed
by Fidelity and Chicago Title, the court observed that the merger agreement
“contemplated restricting Stewart’s freedom to make independent business
decisions” and “essentially deprived the marketplace of an independent
decisionmaker.” In the court’s view, “the only real difference between this
case and Asahi is the fact that the merger was not completed.”
12 CoTherix submitted evidence that neither the United States
Department of Justice nor the FTC “challenged the acquisition as
anticompetitive,” and Asahi disclaimed any challenge to the merger’s
validity. (Asahi, supra, 204 Cal.App.4th at p. 17, fn. 18.)
22
“was making business decisions to maintain a future independent
corporation.” Finally, Ahn suggested that because the merger was not
approved by shareholders for several months after it was announced, fact
questions remained as to whether the challenged conduct even occurred
during the “pre-merger” phase. In its respondent’s brief, Stewart claimed
Ahn’s efforts to distinguish Asahi were “unavailing” where Stewart and
Fidelity intended in good faith to merge and worked together after the
merger agreement was signed to advance the interests of the postmerger
entity.
At oral argument, Ahn substantially clarified his position. Agreeing
that the proposed merger between Stewart and Fidelity was contemplated in
good faith, counsel conceded that he was not claiming the proposed merger
was a sham. Counsel further agreed that had the merger been
consummated, Ahn’s specific claim regarding collusive premerger activity
between Stewart and Fidelity would be barred under Asahi. He confirmed
that the sole basis on which he distinguished Asahi was on the ground that
the merger here did not ultimately go through. In response, Stewart’s
counsel stated that the framework proposed by Ahn would inject too much
uncertainty into corporate affairs. It would chill routine premerger activity
with companies left unsure whether actions taken in good faith would
ultimately be deemed legal or illegal under the Cartwright Act.
Accepting his counsel’s concession, we must reject Ahn’s Cartwright Act
claim on the merits. Under Asahi, where two companies plan to merge in
good faith, premerger activity incidental to that agreement to merge is not
actionable under the Cartwright Act. We find no principled way to cabin
Asahi to a scenario where a good faith merger is ultimately consummated.
A merger might fall through for any number of reasons, and we agree with
23
Stewart that a rule that looks to whether a merger ultimately closed injects
uncertainty that is unmoored from the logic underlying Asahi. Accordingly,
separate and apart from Ahn’s lack of standing, his Cartwright Act claim
fails on the merits.
D. Ahn’s derivative tort claims fail for lack of an independent wrong.
Turning to the tort claims, the trial court relied on Ixchel, supra,
9 Cal.5th 1130 to conclude that Ahn’s causes of action against Stewart for
tortious interference with contract and tortious interference with prospective
economic advantage required an independently wrongful act. Because it
found Ahn lacked standing to sue Stewart under the Cartwright Act, the
court concluded he could not establish this essential requirement for tort
liability. Ahn contests this finding. He distinguishes Ixchel as a case
concerned with protecting legitimate competition and argues a different
standard should apply here where competition was hindered by collusive
behavior. We are not persuaded.
Tortious interference with prospective economic advantage has long
required proof of an independently wrongful act apart from the interference
itself. (Ixchel, supra, 9 Cal.5th at p. 1142.) Tortious interference with
contract, on the other hand, typically does not have that requirement. (Id. at
p. 1141, citing Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th
26, 55.) Because interference with an at-will employment agreement is akin
to interference with a prospective economic relationship, the Supreme Court
recently held that both torts require proof of an independently wrongful act.
(Ixchel, at pp. 1147−1148.) Accordingly, where a plaintiff alleges tortious
interference with an at-will employment contract by a third party, as Ahn
does here, he must prove that the defendant’s conduct was independently
wrongful. (Id. at p. 1148.)
24
Because the pleadings frame the issues on summary judgment (Conroy,
supra, 45 Cal.4th at p. 1250), we revisit the First Amended Complaint. Both
tort claims challenge Stewart’s actions in contacting Fidelity management to
halt Ahn’s sales practices, which in turn allegedly caused Ahn to lose sales
and be fired. Ahn asserted that Stewart’s interference was “illegal and
wrongful” under the Cartwright Act.13 As framed in the complaint, these
tort claims therefore rest on an antitrust violation to show independently
wrongful conduct. With Ahn unable to show an antitrust injury, the trial
court correctly ruled that he likewise could not demonstrate a triable issue on
either economic tort claim.
As Ahn suggests, Ixchel’s result is driven in part by concerns about
chilling legitimate competition. (Ixchel, supra, 9 Cal.5th at p. 1148
[“Allowing disappointed competitors to state claims for interference with at-
will contracts without alleging independently wrongful conduct may expose
routine and legitimate business competition to litigation.”].) But this does
not help him. Ahn seems to suggest that Stewart’s actions served “no
legitimate business purpose” other than to punish him. Yet he acknowledges
Stewart’s procompetitive fear that it would lose customers due to Ahn’s sales
tactics. Under Ahn’s reading of Ixchel, a market player could never confront
a competitor about questionable sales tactics by the competitor’s agents
without facing exposure to costly litigation for tortious interference with
contractual relations. (See Coast Hematology-Oncology Associates Medical
Group, Inc. v. Long Beach Memorial Medical Center (2020) 58 Cal.App.5th
748, 767 [courts are wary of imposing tort liability on economic rivals “based
13 This allegation was made solely as to the tortious interference with
prospective economic relations claim, as tortious interference with an at-will
employment contract did not at the time require independently wrongful
conduct. Ixchel was decided after the First Amended Complaint was filed.
25
on conduct regarded by the commercial world as both commonplace and
appropriate”].) These are precisely the chilling effects to normal business
operations that Ixchel sought to avoid by requiring independently wrongful
conduct in the at-will employment context. While Ahn may prefer a different
result, we reject his contention that the facts of this case place it “outside the
Ixchel court’s reasoning.”
DISPOSITION
The judgment is affirmed. Stewart is entitled to its costs on appeal.
DATO, Acting P. J.
WE CONCUR:
DO, J.
BUCHANAN, J.
26