United States District Court, E.D. North Carolina, Western Division
TERRENCE W. BOYLE, UNITED STATES DISTRICT JUDGE
matter is before the Court on defendant's motion to
dismiss plaintiffs claims pursuant to Rule 12(b)(6) of the
Federal Rules of Civil Procedure [DE 11]'. The matter has
been fully briefed and is ripe for ruling. For the reasons
discussed below, the motion to dismiss is denied.
Armacell and plaintiff K-Flex both manufacture types of foam
pipe insulation. Plaintiff exclusively manufactures
elastomeric foam, which is derived from rubber. Defendant
manufactures both elastomeric foam and polyethylene foam,
known as PE foam. While both types are used for insulation,
elastomeric foam, with its higher cost and higher temperature
resistance, is primarily a product in industrial settings.
K-Flex worked with a distributor, Sunbelt Inc., in the
southeast for several years. Sunbelt began working with
Armacell in early 2017, and almost immediately thereafter
terminated its business arrangement with K-Flex. K-Flex
alleges that termination was due to Armacell's coercion,
which forms the basis for the instant complaint. K-Flex has
alleged four separate claims against Armacell: violations of
Sections 1 and 2 of the Sherman Act, a violation of the
Clayton Act, and a violation of North Carolina's Unfair
and Deceptive Trade Practices Act. This Court has subject
matter jurisdiction on the basis of a federal question over
the federal law claims, and exercises supplemental
jurisdiction over the remaining state law claim under 28
motion to dismiss the claims is made under Rule 12(b)(6) of
the Federal Rules of Civil Procedure. A Rule 12(b)(6) motion
tests the legal sufficiency of the complaint. Papasan v.
Allain, 478 U.S. 265, 283 (1986). When acting on a
motion to dismiss under Rule 12(b)(6), "the court should
accept as true all well-pleaded allegations and should view
the complaint in a light most favorable to the
plaintiff." Mylan Labs., Inc. v. Matkari, 7
F.3d 1130, 1134 (4th Cir.1993). A complaint must allege
enough facts to state a claim for relief that is facially
plausible. Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 570 (2007). Facial plausibility means that the facts
pled "allow the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged,
" and mere recitals of the elements of a cause of action
supported by conclusory statements do not suffice.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A
complaint must be dismissed if the factual allegations do not
nudge the plaintiffs claims "across the line from
conceivable to plausible." Twombly, 550 U.S. at
the Court need not accept a complaint's "legal
conclusions, elements of a cause of action, and bare
assertions devoid of further factual enhancement."
Nemet Chevrolet Ltd. v. Consumeraffairs.com, Inc.,
591 F.3d 250, 255 (4th Cir. 2009). Although complete and
detailed factual allegations are not required, "a
plaintiffs obligation to provide the 'grounds' of his
'entitle[ment] to relief requires more than labels and
conclusions." Twombly, 550 U.S. at 555
(citations omitted). "Threadbare recitals of the
elements of a cause of action, supported by mere conclusory
statements, do not suffice." Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S.
at 555). Plaintiff has four claims based in the same conduct
by the defendant.
Sherman Act. §1
violation of § 1 of the Sherman Act occurs when there is
an "agreement in the form of a contract, combination or
conspiracy that imposes an unreasonable restraint on
trade." Oksanen v. Page Mem 7 Hosp.,
945 F.2d 646, 702 (4th Cir. 1991): When the restraint is
vertical, that is, when the restraint is between two parties
at different distribution levels, more is required for the
restraint to be unreasonable than if the restraint is at the
same level. Vertical restraints are often economically
useful, so courts generally apply the "rule of
reason" analysis to determine whether vertical
restraints are permissible. See Cont'l Airlines, Inc.
v. United Airlines, Inc., 277 F.3d 499, 509 (4th Cir.
2002). To sustain a claim under the rule of reason, a
plaintiff must allege that defendant's actions
unreasonably restrained trade in a plausible market.
Id. Plaintiff must also allege a conspiracy or other
agreement that would operate in restraint of trade. AM.
Needle, Inc. v. Nat'l Football League, 560 U.S. 183,
190 (2010). Parallel conduct is insufficient. A plan is
the first question is whether plaintiff has alleged facts
regarding a particular market-both a product market and a
geographic market. Second, the plaintiff must argue there is
a contract or conspiracy. Here, such an allegation must
include facts that, taken in the light most favorable to the
plaintiff, would show that Armacell actually made agreements
in order to restrain trade. K-Flex has pled enough facts to
sustain a claim upon which relief can be granted.
K-Flex has alleged both a product market and a geographic
market that would support its claims. Determining what
product market is appropriate requires a "plenary"
examination, covering "the facts peculiar to the
business, " among other concerns. Cont'l
Airlines, Inc. v. United Airlines, Inc., 277 F.3d 499,
509 (4th Cir. 2002) (internal quotation marks omitted).
Products that have "reasonable interchangeability for
the purposes for which they are produced" belong in the
same market; therefore, it follows that products that are not
interchangeable are not in the same market. United States
v. E. I du Pont de Nemours & Co., 351 U.S. 377, 404
(1956). At this stage, K-Flex's market allegations are
sufficient to go forward. K-Flex has pled facts to show that
there is a separate market for elastomeric foam insulation,
as opposed to PE foam or other kinds of insulation.
Elastomeric foam is made from different material, has
different characteristics and price points, and is primarily
used in different settings. The fact that K-Flex does not
manufacture PE foam also bolsters its claim.
K-Flex's allegations of a geographic market are
plausible. The appropriate geographic market is "the
area within which the defendant's customers.. .can
practicably turn to alternative supplies if the defendant
were to raise its prices." EI. du Pont de Nemours
& Co. v. Kolon Indus., Inc., 637 F.3d 435, 441 (4th
Cir. 2011). The market can be the entire nation. Brown
Shoe Co. v. United States, 370 U.S. 294, 377 (1962). In
support of this domestic market definition, K-Flex has
alleged facts to show that because this insulation is so
expensive to transport, it would only be made in the United
States for United States consumption. Additionally, K-Flex
has argued that the coercion taking place in the southeast
will have effects throughout the domestic market.
can also sustain a claim that there was an agreement. While a
conclusory allegation of conspiracy is not enough, K-Flex has
alleged more than that. Plaintiff has claimed that Armacell
is working directly with Sunbelt and other distributors to
exert control over the marketplace, to the detriment of the
free flow of trade. Plaintiff has claimed that its own
distribution agreement was terminated due to Armacell's
pressure. The allegations that this restraint on competition
will harm competition and lead to increased prices state a
claim upon which relief could be granted.