UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA. Plaintiffs,

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1 Case :-cv-000-h-blm Document Filed 0/0/ Page of DEBRA HOSLEY, et al., vs. UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA Plaintiffs, NATIONAL PYGMY GOAT ASSOCIATION; and DOES TO 0, INCLUSIVE, Respondents. CASE NO. cv0-h (BLM) ORDER DENYING DEFENDANTS' MOTION TO DISMISS [DOC. NO. ] On April, 0, Defendant National Pygmy Goat Association ("NPGA") filed a motion to dismiss Plaintiffs' complaint for failure to state a claim upon which relief may be granted. (Doc. No..) On April, 0, Plaintiffs filed a response in opposition to NPGA's motion. (Doc. No..) On April, 0, NPGA filed a reply in support of its motion. (Doc. No..) The Court, pursuant to its discretion under Local Rule.(d)(), determines that this matter is appropriate for resolution without oral argument, submits the motion on the parties' papers, and vacates the hearing. For the following reasons, the Court denies NPGA's motion to dismiss. - -

2 Case :-cv-000-h-blm Document Filed 0/0/ Page of I. Background Plaintiffs are a group of individuals and entities in the business of breeding goats. (See Doc. No. at,.) Specifically, Plaintiffs raise a breed of goat known the "grey/brown agouti." (Id. at.) NPGA is a large pygmy goat registry and membership organization. (Id. at.) Its mission includes facilitating communication and cooperation among pygmy goat breeders and maintaining a registry of certified pygmy goats and their offspring. (Id.) The membership of NPGA is composed of individuals and entities in the goat breeding business, many of whom compete with each other economically. (Id.) Plaintiffs are or were among those members. (Id. at.) NPGA modifies its rules through a board of directors with input from members. (Id. at.) This lawsuit arises out of a change to NPGA's breed standards. Plaintiffs allege that, beginning in 00, NPGA members who did not breed grey/brown agoutis (the "proponents") organized a campaign to remove grey/brown agoutis from the list of goat breeds eligible for registration. (Id. at 0.) The proponents allegedly spread misinformation about grey/brown agoutis in the goat breeding community, including through presentations to the NPGA board of directors and through communication on social media. (Id. at 0-.) In June 0, the proponents succeeded in changing the NPGA breed standards such that grey/brown agoutis are ineligible for competition and registration. (Id. at.) Plaintiffs filed this lawsuit on February, 0. They allege: () conspiracy in restraint of trade in violation of section of the Sherman Antitrust Act, U.S.C. (id. at -); () monopolization in violation of section of the Sherman Antitrust Act, U.S.C. (id. at -0); () illegal restraints of trade in violation of the California Cartwright Act, Cal. Bus. & Prof. Code 0 et seq. (id. at 0); () false advertising in violation of the Lanham Trademark Act,. U.S.C. (id.); and () tortious interference with business relations (id. at ). On April, 0, NPGA filed a motion to dismiss the complaint for failure to state a claim under Federal Rule of Civil Procedure (b)(). (Doc. No..) - -

3 Case :-cv-000-h-blm Document Filed 0/0/ Page of II. Legal Standard on a (b)() Motion to Dismiss A motion to dismiss a complaint under Federal Rule of Civil Procedure (b)() tests the legal sufficiency of the claims asserted in the complaint. Navarro v. Block, 0 F.d, (th Cir. 00). A complaint generally must satisfy only the minimal notice pleading requirements of Federal Rule of Civil Procedure (a)() to evade dismissal under a Rule (b)() motion. Porter v. Jones, F.d, (th Cir. 00). Rule (a)() requires that a pleading stating a claim for relief contain a short and plain statement of the claim showing that the pleader is entitled to relief. Fed R. Civ. P. (a)(). While a complaint attacked by a Rule (b)() motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Bell Atlantic Corp. v. Twombly, 0 U.S., (00). In ruling on a motion to dismiss for failure to state a claim, the Court must accept as true all specific facts alleged in the complaint. See, e.g., Ashcroft v. al-kidd, S. Ct. 0, 0 (0). But a complaint does not suffice if it tenders naked assertion[s] devoid of further factual enhancement. Ashcroft v. Iqbal, U.S., (00) (quoting Twombly, 0 U.S. at ). Factual allegations must be enough to raise a right to relief above the speculative level. Twombly, 0 U.S. at (citing C. Wright & A. Miller, Federal Practice and Procedure, pp. (d ed. 00)). To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Hartmann v. Cal. Dept. of Corr. & Rehab., 0 F.d, (th Cir. 0) (quoting Iqbal, U.S. at ). Dismissal under Rule (b)() is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory. Mendiondo v. Centinela Hosp. Med. Ctr., F.d 0, 0 (th Cir. 00). // - -

4 Case :-cv-000-h-blm Document Filed 0/0/ Page of III. Discussion In their motion to dismiss, NPGA argues that Plaintiffs' complaint is deficient on a number of grounds. The Court evaluates them in turn. A. Sherman Antitrust Act Section Section of the Sherman Antitrust Act reads: "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States... is declared to be illegal." To state a claim under Section, a plaintiff must plead two elements: () that the defendant was involved in an agreement; and () that the agreement unreasonably restrained interstate or foreign trade. Am. Needle, Inc. v. Nat'l Football League, 0 U.S., (00). NPGA argues that the complaint does not meet the first element of a Section claim because it does not state that NPGA conspired with another person or entity, as NPGA itself is a single entity. (Doc. No. at -, -.) "The question whether an arrangement is a contract, combination, or conspiracy is different from and antecedent to the question whether it unreasonably restrains trade." Am. Needle, 0 U.S. at. "The meaning of the term 'contract, combination... or conspiracy' is informed by the 'basic distinction' in the Sherman Act 'between concerted and independent action' that distinguishes of the Sherman Act from." Id. at 0 (quoting Copperweld Corp. v. Independence Tube Corp., U.S., ()) (internal quotation marks omitted). Determining whether an actor is a single entity or multiple entities for antitrust purposes is a functional, rather than a formalistic, analysis. Id. at. Courts "have repeatedly found instances in which members of a legally single entity violated when the entity was controlled by a group of competitors and served, in essence, as a vehicle for ongoing concerted activity." Id. (citing Northwest Wholesale Stationers, Inc. v. Pacific Stationery & Printing Co., U.S. (); Nat'l Collegiate Athletic Assn. v. Bd. of Regents of Univ. of Okla., U.S. (); United States v. Topco Associates, Inc., 0 U.S. (); United States v. Sealy, Inc., U.S. 0 (); Associated Press v. - -

5 Case :-cv-000-h-blm Document Filed 0/0/ Page of United States, U.S. (); United States v. Terminal Rd. Assn. of St. Louis, U.S. ()). The analysis turns on whether an agreement involved "separate economic actors pursuing separate economic interests." Id. at (quoting Copperweld, U.S. at ). Here, Plaintiffs' complaint pleads facts sufficient to find that NPGA's rulemaking activities constituted concerted action among market competitors, thereby fulfilling the first element of the Sherman Act Section analysis. The complaint states that the purpose of the NPGA is to facilitate communication and cooperation among competing breeders of pygmy goats. (Doc. No. at.) It further states that NPGA is controlled by a group of competitors that do not breed grey/brown agoutis. (Id. at.) Accepting these allegations as true for the purpose of this motion to dismiss, the NPGA is an agreement among market actors with independent interests rather than a single entity. Accord Abraham & Veneklasen Joint Venture v. American Quarter Horse Association, No. :-cv-0-j, 0 WL 0 at * (N.D. Tex. May, 0) (denying summary judgment to association of commercial horse breeders because competitors who were separate economic actors controlled the organization); see also Am. Needle, 0 U.S. at. In addition, NPGA argues that the complaint does not meet the second element of a Section claim because NPGA's actions were reasonable and procompetitive, and therefore cannot qualify as an unreasonable restraint of trade. (Doc. No. at -.) But Plaintiffs' complaint contains sufficient factual allegations to raise a plausible inference that NPGA's new, more restrictive breed standards have harmed competition in the goat breeding market. The complaint states that the proponents of the more restrictive breed standard are NPGA members who do not raise grey/brown agoutis and therefore have economic incentives to reduce the desirability of these goats. (Doc. No. at -.) It states that, due to the importance of NPGA in the pygmy goat market, grey-brown agoutis have lost all economic value as a result of the new standards. (Id. at,.) Consequently, the - -

6 Case :-cv-000-h-blm Document Filed 0/0/ Page of new standards reduce the supply of economically viable goats and inflate the value of the proponents' goats. (Id.) NPGA's contention that its efforts to refine breed standards for pygmy goats is procompetitive on balance may have merit, but this argument is better suited to a later stage in the litigation with a more developed record. As a result, NPGA's argument that Plaintiffs do not state a claim under Section of the Sherman Antitrust Act fails. B. Sherman Antitrust Act Section Section of the Sherman Antitrust Act makes illegal the monopolization or attempted monopolization of a part of interstate or foreign commerce. U.S.C.. The elements of monopolization are: () possession of monopoly power in the relevant market; and () "the willful acquisition or maintenance of that power, as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 0 U.S., 0 (00). In other words, the defendant must have engaged in predatory or exclusionary conduct in an effort to obtain, keep, or enhance its monopoly power. See, e.g., Aspen Skiing Co. v. Aspen Highlands Skiing Corp., U.S., 0-0 (). In its motion to dismiss, NPGA argues that, if it does enjoy a monopoly in the market for pygmy goats, it did not establish or enhance its monopoly power through anticompetitive conduct. (Doc. No. at -0.) But Plaintiffs' complaint states sufficient facts to raise a plausible inference that NPGA engaged in anticompetitive practices in order to maintain or enhance its monopoly power or that of its controlling members. Plaintiffs allege that NPGA's change in the breed standard is anticompetitive because it excludes Plaintiffs' grey-brown agoutis from the pygmy goat market, thereby reducing competition against proponents' goats and enhancing NPGA's or the proponents' monopoly power. (Id. at -0.) // - -

7 Case :-cv-000-h-blm Document Filed 0/0/ Page of Accordingly, Plaintiffs state adequate facts in support of their Sherman Act Section claim to survive NPGA's motion to dismiss. NPGA is free to renew its arguments to the contrary at a later stage in the litigation, with the benefit of a more developed record. C. Lack of Standing NPGA argues that the Court should dismiss Plaintiffs' complaint because Plaintiffs do not have standing to pursue an antitrust case against NPGA. (Doc. No. at 0.) Federal antitrust law does not "provide a remedy in damages for all injuries that might conceivably be traced to an antitrust violation." Associated General Contractors of Cal., Inc. v. Cal. State Council of Carpenters, U.S., () (quoting Hawaii v. Standard Oil Co., 0 U.S., n. ()). Instead, the court must "determin[e] whether the plaintiff is a proper party to bring a private antitrust action." Id. at n.. Courts have ruled, for instance, that employees of a firm and their union were not the proper parties to bring an antitrust suit against a third party having a relationship with their employer because the alleged anticompetitive conduct was directed at the employer, not the employees. Eagle v. Star-Kist Foods, Inc., F.d, (). Here, NPGA argues that Plaintiffs have no standing to sue NPGA in antitrust because they are neither NPGA's competitors nor consumers of NPGA goods or services. (Doc. No. at 0.) But Plaintiffs are participants in the goat breeding market. Unlike in Eagle, on which NPGA relies in its motion, the anticompetitive conduct that Plaintiffs allege affects them directly rather than through an attenuated causal chain. And unlike in Eagle, in which the plaintiffs' employer was the proper party to sue in antitrust, NPGA has not identified a more appropriate party than Plaintiffs to assert the claims in the complaint. Thus, accepting as true the facts as stated in Plaintiffs' complaint, Plaintiffs have standing to sue NPGA in antitrust. // - -

8 Case :-cv-000-h-blm Document Filed 0/0/ Page of D. California Cartwright Act The Cartwright Act makes unlawful "every trust." Cal. Bus. & Prof. Code. It defines a trust as "a combination of capital, skill or acts by two or more persons... [t]o create or carry out restrictions in trade or commerce" and provides additional examples of unlawful combinations. Id. 0. Section of the Cartwright Act "is analogous to section of the Sherman Act." Aguilar v. Atlantic Richfield Co., Cal. th, (00). California courts typically rely on federal Sherman Act precedents to analyze claims asserted under the Cartwright Act. See, e.g., id. at -; Exxon Corp. v. Superior Court, Cal App. th, () ("State courts have liberally applied federal Sherman Act doctrine in interpreting the Cartwright Act.") NPGA argues that the Court should dismiss Plaintiffs' Cartwright Act claims for the same reasons as its Sherman Act claims. (Doc. No. at -.) Because the Court rejects NPGA's arguments regarding Plaintiffs' Sherman Act claims, NPGA's arguments in favor of dismissing Plaintiffs' Cartwright Act claims fail. E. Lanham Act Under the false advertising provision of the Lanham Trademark Act: Any person who... uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which-- (A) is likely to cause confusion... as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or (B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act. U.S.C. (). NPGA argues that Plaintiffs do not state a claim under the Lanham Act because: () NPGA and Plaintiffs are not direct competitors; and () the complaint does not attribute any misstatements to NPGA. (Doc. No. at 0-.) // - -

9 Case :-cv-000-h-blm Document Filed 0/0/ Page of "[A] plaintiff suing under (a) ordinarily must show economic or reputational injury flowing directly from the deception wrought by the defendant's advertising; and that that occurs when deception of consumers causes them to withhold trade from the plaintiff." Lexmark Int'l, Inc. v. Static Control Components, Inc., No. -, slip op. at (March, 0). The plaintiff need not show that it competes directly with the defendant; "[i]t is... a mistake to infer that because the Lanham Act treats false advertising as a form of unfair competition, it can protect only the false-advertiser's direct competitors." Id. at. Thus, NPGA's argument that the Court should dismiss Plaintiffs' Lanham Act claim for lack of direct competition is incorrect. As to NPGA's second argument, Plaintiffs state sufficient facts in the complaint to raise an inference that NPGA or its agents made misstatements that caused Plaintiffs economic injury. The complaint names "Doe" defendants and asserts that they acted as NPGA's agents at relevant times. (Doc. No. at.) It alleges many specific misstatements by NPGA members and "judges," including at public events and on social media. (Id. at,.) If NPGA wishes to argue that the complaint is incorrect in attributing these statements to the organization rather than strictly to the individuals who made them, it may do so at a later stage of the litigation. Accordingly, the Court denies NGPA's motion as to Plaintiffs' Lanham Act claims. F. Tortious Interference with Business Relations NPGA argues that the Court should dismiss Plaintiffs' claim based on interference with plaintiffs' prospective economic advantage because the complaint does not plead a specific relationship between the plaintiff and a third party with which NPGA interfered or establish a probability of future economic benefit from these existing relationships. (Doc. No. at.) The elements for intentional interference with prospective economic advantage in California are: - -

10 Case :-cv-000-h-blm Document Filed 0/0/ Page 0 of () an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; () the defendant's knowledge of the relationship; () intentional acts on the part of the defendant designed to disrupt the relationship; () actual disruption of the relationship; and () economic harm to the plaintiff proximately caused by the acts of the defendant. Youst v. Longo, Cal. d, (). Plaintiffs' complaint states that as a result of NPGA's false and misleading statements, they received many s and telephone calls from present, prospective, and former customers questioning the pedigree and quality of their goats. (Doc. No. at.) It alleges that NPGA purposely interfered with these existing relationships, and that Plaintiffs lost sales as a result. (Id.) NPGA's arguments regarding the probability of future economic benefit to Plaintiffs from their existing relationships with customers are better suited to a motion for summary judgment when the record is more fully developed. As a result, the Court denies NPGA's motion as to Plaintiffs' tortious interference claim. IV. Conclusion Accepting as true all facts alleged in Plaintiffs' complaint, Plaintiffs' claims are not barred by the statute of limitations. Accordingly, the Court denies NPGA's motion to dismiss. IT IS SO ORDERED. DATED: May, 0 HON. MARILYN L. HUFF United States District Judge - 0 -