Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 1 of 33 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Transcription

1 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 1 of 33 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No.: TOG, INC. AND WILD HARVEST, LLC, on behalf of themselves and all others similarly situated, v. Plaintiffs, UNITED STATES POSTAL SERVICE, INNOVATIONS GROUP, INC., a Delaware corporation, and OMAR DAJANI, an individual Defendants. CLASS ACTION COMPLAINT FOR VIOLATION OF SHERMAN ANTITRUST ACT AND CLAYTON ACT Comes now, TOG, Inc. and Wild Harvest, LLC (collectively, Plaintiffs ) by and through their counsel, and for their Complaint against Defendants United States Postal Service ( USPS ), Innovations Group, Inc. ( IGI ) and Omar Dajani ( Dajani ) (collectively, Defendants ), state as follows: 1. This is an action under the Sherman Act and the Clayton Act, 15 U.S.C. 1, 2, 12, 14, and 15, to recover treble damages, injunctive relief and attorneys fees and costs based on Defendants anticompetitive activities, restraints on trade, monopolization or attempts to monopolize markets, improper tying agreements, and combinations, agreements and conspiracies to commit such acts v2

2 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 2 of USPS, IGI and Dajani, individually and conspiring together have imposed a tying arrangement as a condition of operating a CARS Contract Postal Unit. Specifically, Defendants have imposed a condition that a Contract Postal Unit ( CPU ) utilizing the Contract Access Retail System ( CARS System ) may only purchase label rolls for use in the CARS System from IGI. IGI sells its label rolls at substantially higher prices than the price such label rolls could be purchased in an open, competitive market. Tying the provision and use of the CARS System (the Tying Product) to the required purchase of IGI CARS Label Rolls (the Tied Product), was intended to, and did, create a monopoly in the Tied Product market, and has resulted in substantial restraints of trade in violation of the Sherman Act and Clayton Act. The supracompetitive prices paid for IGI CARS Label Rolls have caused an antitrust injury to all Class members. PARTIES 3. Plaintiff TOG, Inc. (TOG) is a Texas Corporation, with its principle place of business in Abilene, Texas. In or about March of 2005, TOG entered into a contract with USPS to operate a CPU utilizing the RAMM-60 Postage Evidencing Device ( RAMM-60 ). The contract included the provision: The supplier [TOG] will be responsible for purchasing supplies for RAMM-60 after the initial supply is exhausted. These supplies will be ordered from the authorized RAMM-60 supplier. Only authorized supplies may be used in this device. In 2007, the RAMM-60 was replaced with the CARS System, and all terms in CPU Contracts referencing RAMM-60 were modified to replace those references with CARS. The authorized CARS provider is IGI. TOG purchased CARS Label Rolls from IGI for use in the CARS System. The amount paid for the Label Rolls was supracompetitive; it was greater than TOG would have paid, 2

3 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 3 of 33 but for the antitrust violations alleged herein. TOG thereby suffered injury in its property, in the form of overcharges, injury that antitrust laws are intended to prevent and remedy. 4. Plaintiff Wild Harvest, LLC ( Wild Harvest ) is a Colorado Limited Liability Company, with its principle place of business in Arvada, Colorado. In or about November 2008, Wild Harvest entered into a contract with USPS to operate a CPU utilizing the CARS System. The contract included the provision: The supplier [Wild Harvest] will be responsible for purchasing supplies for CARS after the initial supply is exhausted. Label Rolls must be ordered from the authorized CARS provider. The authorized CARS provider is IGI. Wild Harvest purchased CARS Label Rolls from IGI for use in the CARS System. The amount paid for the Label Rolls was supracompetitive; it was greater than Wild Harvest would have paid, but for the antitrust violations alleged herein. Wild Harvest thereby suffered injury in its property, in the form of overcharges, injury that antitrust laws are intended to prevent and remedy. 5. Defendant Innovations Group Inc. is a Delaware corporation, organized and existing under the laws of the State of Delaware, with its principal place of business at 2750 Prosperity Avenue, Suite 450, Fairfax, VA IGI is a person within the definition of the Clayton Act for purposes of antitrust liability. 15 U.S.C Defendant United States Postal Service is an independent establishment of the Executive Branch of the United States Government. 39 U.S.C USPS is a person as defined in subsection (a) of the first section of the Clayton Act for purposes of the antitrust laws, which include the Sherman Act, 15 U.S.C. 1-7, and the Clayton Act, 15 U.S.C , 29, & U.S.C.A 409 (e)(1)(b). 3

4 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 4 of USPS is not immune under the doctrine of sovereign immunity from suit in federal court by any person for any violation of federal law, including the antitrust laws of the United States. 39 U.S.C.A 409 (e)(1). 10. Omar Dajani ( Dajani ) is the Chief Executive Officer of IGI, and, upon information and belief, is a citizen of the State of Virginia. 11. Upon information and belief, Dajani has engaged in regular and systematic contacts in the State of Colorado in connection with providing services to USPS for the CPU program, which is administered in the State of Colorado. Such contacts include, but are not limited to, negotiation and contracting with the USPS original Contracting Officer on the IGI Contract (as defined below), and engaging in weekly telephone conferences with the USPS s office in Colorado throughout the implementation phase of the IGI Contract. 12. Dajani authorized, ordered or committed the acts constituting, in whole or in part, the antitrust violations described herein, and is a person within the definition of the Clayton Act for purposes of antitrust liability. 15 U.S.C. 12. JURISDICTION AND VENUE 13. The United States District Courts have original, but not exclusive, jurisdiction over all actions brought by or against USPS. 39 U.S.C. 409(a). 14. Jurisdiction is proper in this Court as to USPS pursuant to 39 U.S.C. 409(a) and 409(e)(1), and 28 U.S.C Jurisdiction against all Defendants exists pursuant to Sections 4, 12 and 14 of the Clayton Act, 15 U.S.C. 15, 22 & 24, and pursuant to 28 U.S.C as an action involving the laws of the United States. 4

5 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 5 of Venue is proper in this Court pursuant to 15 U.S.C. 15 and 22 because Defendants IGI and USPS transact business in this jurisdiction. Venue is proper against Defendant Dajani because he has extensive and ongoing business contacts in the State of Colorado, and because this dispute arises out of such contacts. Further, venue is proper in this district because a substantial amount of interstate trade and commerce involved and affected by the alleged antitrust violation was and is carried out in this district because the CPU program is operated out of the USPS Colorado district office, many Class members are located in this district, and one of the named Class representative s principal place of business is in this district. BACKGROUND FACTS 17. Contract Postal Units are part of USPS s Alternative Access Channels Program. At all relevant times, including through the present, a Manager for Contract Postal Access Channels is and has been Dennis W. Kelley, III ( Kelley ). 18. A CPU is a supplier-owned or supplier-leased site operated by the Supplier, under contract with USPS, to provide postal services to the public at USPS prices. These units provide full service retail products and services to postal customers. They are housed within a partner facility and are operated and managed by partner employees. 19. CPUs are often conveniently located inside other businesses and offer customers the ability of being able to purchase stamps or ship packages at USPS prices while patronizing the partner businesses. 20. Retailers that participate in the Contract Postal Unit program are provided USPS branding rights and signage. A build-out that meets USPS regulations is required. Some Contract Postal Unit partners are compensated based on performance. 5

6 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 6 of Operating a CPU increases foot traffic to the partner business and provides additional customer convenience. 22. The legal rights of CPU Suppliers and those wishing to become CPU Suppliers are provided within the terms of contracts and solicitations for contracts with the USPS. 23. There are the two types of contracts for CPUs: (1) performance-based percentage payment contracts, and (2) firm-fixed-price contracts. 24. Where a performance-based percentage payment contract is entered into, the CPU is normally a Contract Access Retail System unit. The USPS provides the CARS System to the CPU for weighing, metering, and calculating postage on mail pieces. Only CPUs under a performance-based percentage payment contract that do not have Post Office boxes or sell USPS money orders qualify for a CARS System. 25. To become a CARS CPU, a supplier must complete a solicitation package and execute the contract, which includes the following components, copies of which are attached hereto at Exhibit 1 (the CARS CPU Contract ): a. Part 1: Contract Postal Unit Schedule. b. Part 2: Solicitation Provisions. c. Part 3: Contract Clauses. d. Part 4: Attachments. i. Attachment 1: Requirements. ii. Attachment 2: Contract Postal Unit Supplier Business Proposal and Information. iii. Attachment 4: Compensation. iv. Attachment 5: CPU Design and Construction Requirements. 26. The USPS is the only entity that may authorize and contract to permit the operation of a CPU. 6

7 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 7 of The USPS district manager s approval is mandatory on all funding documents relating to CPUs, as stated in USPS Handbook F-66, General Investment Policies and Procedures, 2-6.2, Contract Postal Units, which is stated below in its entirety: Contract Postal Units are post offices operated by a contractor under the jurisdiction of [host] post office, usually in a store or other privately owned and operated place of business. At the Headquarters level, vice presidents and above have the authority to approve funding for contract postal units. They may re-delegate, in writing, portions of this authority. At the field level, the vice president, Area Operations, has the authority to establish contract units (see Postal Operations Manual (POM), Issue 8, July 1998, section 123.2). This approval may be re-delegated, in writing, to the district manager, but may not be redelegated by the district manager. 28. CPUs operate throughout the United States. According to the Contract Postal Units Contract Oversight Audit Report dated September 30, 2011, there were approximately 4,665 operating nationwide. Upon information and belief, approximately 1,500 of these CPUs operate under a CARS CPU Contract. Contracts for the Tying Products 29. On or about February 28, 2007, Defendants USPS and IGI entered into a contract for the provision of the CARS System. See Exhibit 2, Base Contract for Provision of Mailing Systems for Contract Postal Units between IGI and USPS ( the IGI Contract ). 30. The purpose of the IGI Contract is to provide the CARS System, leased from IGI to USPS, for the purpose of providing products and services to CARS CPUs throughout the United States. 7

8 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 8 of The IGI Contract is an Indefinite Delivery/Indefinite Quantity contract to provide the CARS System as described in the Statement of Work (SOW) attached to the IGI Contract. Exhibit 2, The IGI Contract requires provision of multiple products, including at least eight separate hardware products. One of the hardware components is an Indicia Printer for printing metered labels for postage. 33. The IGI Contract also requires provision of various other products and services to be delivered by IGI directly to the CPUs and/or indirectly to the CPUs through USPS under the terms of the IGI Contract. These include, but are not limited to, Program Management, Hardware Engineering and Development, Software Engineering and Development, Data Management Center, Training, Manuals, and Help Desk Services. 34. The mailing system described by the IGI Contract, including each of these component parts, products, and services has come to be known as the CARS System. 35. The purpose of the CARS System is to make it very easy for CPU Suppliers employees to process USPS postal transactions. 36. Under the CARS CPU Contract, the CARS System is provided to the CPU by USPS. Exhibit 1, Part 4, Attachment 5, Part A ( Responsibilities Schedule ). 37. Through the CARS CPU Contract, USPS contracts with CPUs ( CARS CPUs ) to provide, sell or lease goods, wares, merchandise, machinery, supplies, or other commodities including, but not limited to, signage, furniture, collection boxes, postage, and the CARS System. These are, individually and collectively, the Tying Products. Exhibit 1. 8

9 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 9 of 33 Defendants Exert Monopolistic Economic Power in the Tying Products 38. The ability to own and/or operate a CPU is only possible through a contract with the USPS. 39. USPS is the only entity authorized to permit the operation and set the terms of operation of CPUs, including CARS CPUs. 40. USPS is the only entity authorized to provide for use or sale of the items provided under the terms of the CARS CPU Contract for use or resale at CARS CPUs. 41. USPS controls 100% of the CARS CPU market, including all goods, wares, merchandise, machinery, supplies, or other commodities supplied under the CARS CPU Contract, as well as 100% of the demand for CARS Systems. 42. In order to contract with the USPS to own or operate a CPU, the Supplier must submit a bid to USPS in the form attached hereto as Exhibit 1, Parts 1 and USPS distributes 100% of the CARS Systems in the CARS user market, which it leases from IGI through the IGI Contract. 44. USPS requires all CARS CPUs to utilize the CARS System provided by IGI. 45. IGI, through the IGI Contract, produces, leases and supplies 100% of the CARS Systems in the CARS market to CARS CPUs. 46. This included services, maintenance, repair and replacement parts and components, to CARS CPUs. 47. IGI is the exclusive manufacturer and supplier of CARS Systems, including all hardware and software. 48. IGI and USPS, together, provide the CARS System to all CARS CPUs. 9

10 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 10 of 33 CARS Label Rolls Consumables The Tied Product 49. The IGI Contract requires that the CARS System include an Indicia Printer that can communicate with the software to obtain data for printing and accounting for the indicia (postage) printed, and meet other specific functionality requirements including the ability to print self-adhesive labels in specified sizes. IGI Contract, Exhibit 2, IGI selected the Citizen brand printer, p/n clp521z-c, to meet the Indicia Printer requirement under the IGI Contract ( CARS Printer ). The CARS Printer is also sold by Pitney Bowes as product number JM The CARS Printers are provided as a part of the CARS System directly to CPUs upon USPS notifying IGI that a new CARS CPU Contract has been entered. Upon such notice IGI delivers the CARS System to the CPU. 52. Under the terms of the IGI Contract, IGI is required to have the capability of providing all consumables required by the CARS System, including the labels used in the Indicia Printer, which must be capable of performing under certain environmental conditions. IGI Contract, Exhibit 2, Under the terms of the IGI Contract, IGI developed label roll consumables that could be used in the selected Indicia Printer. 54. Upon information and belief, IGI s CARS Label Rolls underwent testing to ensure that they met certain environmental, adhesive and other requirements set by the USPS Engineering Department ( USPS Label Roll Specifications ). 10

11 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 11 of Once in conformance with the USPS Label Roll Specifications, IGI s CARS Label Rolls were approved for use in the CARS System (hereinafter referred to as CARS Label Rolls or the Tied Product ). 56. Since the inception of the IGI Contract, there were, and are, other sellers of label rolls that can be used in the Pitney Bowes JM10 or Citizen p/n clp521z-c printers. Although such label rolls have not been tested for compliance with the USPS Label Roll Specifications. ( Non-Certified Label Rolls ). 57. Suppliers of Non-Certified Label Rolls include Modity Inc. and SuperiorMeter Supplies ( Non-Certified Suppliers ). 58. Upon information and belief, the number of such Non-Certified Label Rolls sold to CARS CPUs from the inception of the IGI contract to July 2011 constituted less than 25% of the Tied Product market. Market Definition 59. The relevant Tying Product market is the CARS System, distributed to CARS CPUs throughout the United States. 60. The relevant Tied Product market is the CARS Label Roll market, sold to CARS CPUs throughout the United States. CPU: The Tying Arrangement 61. USPS has included the following term in the contracts it enters with each CARS The Postal Service will be providing a CARS to the performancebased CPU Supplier. This device is a weighing, rating, and metering system. CARS will come with training materials and initial supplies. 11

12 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 12 of 33 The CPU Supplier will be responsible for the following expenses regarding this device: (1) The CPU Supplier will pay for all postage loaded into CARS. This payment will be made at the time of postage download from an ACH debit account. The CPU Supplier is responsible for the prompt payment of all invoices. Failure to pay invoices in a timely manner as determined by the CARS provider which causes the CARS provider to terminate the payment agreement and such termination results in the CPU Supplier not being able to provide the mandatory postal products and services may result in termination of the CPU contract. (2) The supplier will be responsible for purchasing supplies for CARS after the initial supply is exhausted. Label Rolls must be ordered from the authorized CARS provider. Use of any other provider will void the system warranty and the CPU Supplier will be liable for all costs incurred to repair CARS. A current list of supplies and prices can be obtained from the authorized CARS provider as identified in the initial training materials. If the CPU contract is terminated, CARS will be returned to the Postal Service with any other Postal Issued Equipment as instructed by the COR. See Exhibit 1, Part 3 (Contracting Clauses) 3.9 (emphasis added). 62. The authorized CARS provider is IGI. 63. IGI required that CARS CPUs purchase all CARS Label Rolls only from IGI, or not deal in the goods of another, as a condition of the IGI Contract to provide the CARS System, including maintenance, repair and replacement of CARS System components. 64. USPS, acting in concert with IGI, agreed with IGI that all CARS CPUs must purchase CARS Label Rolls only from IGI, or not deal in the goods of another, as a condition of 1) receiving and maintaining a CARS CPU Contract with USPS, and/or 2) receiving the CARS System, including maintenance, repair and replacement of CARS System components through the IGI Contract, and/or 3) contracting for all other goods, wares, merchandise, machinery, supplies, or other commodities supplied by USPS under the CARS CPU Contract. 12

13 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 13 of 33 CPUAA Tests and Obtains Approval of its CARS Label Rolls as Meeting or Exceeding USPS Label Roll Specifications and Attempts to Enter the CARS Label Roll Market 65. The Contract Postal Unit Association of America ( CPUAA ) is a membership organization providing information and support to CPUs, as well as offering goods and services to CPUs. 66. CPUAA, working with a representative of USPS, obtained the specifications for CARS Label Rolls, contracted for the design and manufacturing of CARS Labels Rolls, and had its label rolls tested by USPS s engineering department to ensure that its label rolls met or exceeded USPS Label Roll Specifications. 67. In July 2011, after completion of the testing and certification process, USPS issued the following statement in the July 2011 CPUpdate, a publication sent to the area and district retail specialists responsible for providing day-to-day support for CPUs in their region: See Exhibit 3. CARS Labels The requirement to print an additional internal tracking label on select products has increased the cost of labels for our CARS CPU partners. In an effort to reduce the impact of this requirement, we have agreed to allow CARS suppliers to purchase labels from any source that has had their labels certified by the postal engineering team as having met or exceeded all postal and Citizen printer requirements. The only authorized suppliers of labels for the CARs system are Innovations Group Inc. (IGI) and Contract Postal Unit Association of America (CPUAA). 68. Upon information and belief, the CPUpdate is distributed to all USPS district offices and retail specialists in the United States who ultimately share this information with all the CARS CPUs in their regions. 13

14 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 14 of CPUAA sent marketing flyers, which included a portion of the statement in the CPUpdate, to Plaintiffs and many Class members offering its label rolls ( CPUAA CARS Label Rolls ) at substantially lower prices than those charged by IGI. IGI and USPS s Attempts to Retain IGI s Monopoly in the Tied Market 70. After the CPUAA CARS Label Rolls had been approved as meeting or exceeding USPS Label Roll Specifications, and USPS issued its statement indicating that CPUAA was an approved CARS Label Roll supplier, IGI commenced a campaign to force or recreate its monopoly over the CARS Label Rolls (the Tied Product), to enforce the tying arrangement, and to restrain trade in the Tied Product. See Exhibit IGI and/or USPS, issued the following message through the CARS System: Date: 7/15/2011 Title: Printer Label Order Urgent Message - Effective Immediately - the only source for approved Label Consumables is the Innovations Group. All orders must be placed with the Innovations Group (IGI) via the Help Desk Line or the website Please disregard any solicitation from any other source. 72. This message caused confusion in the market. For example, in early November 2011, Barry Meyer from Columbia, South Carolina contacted his USPS Retail Specialist to confirm that IGI would honor servicing of the CARS System if he used non-igi CARS Label Rolls, because IGI had told him they would not. The Retail Specialist responded that CPUAA was an authorized CARS Label Rolls supplier. 14

15 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 15 of From July through December 15, 2011, USPS did not retract the approval of CPUAA as an approved suppler of CARS Label Rolls. 74. IGI took matters into its own hands to force continuation of the tying arrangement and threatened that if USPS ended the illegal tying arrangement, then IGI would refuse to provide the products and services required under the IGI Contract or, in the alternative, would require an equitable adjustment or higher fees for lease of the CARS System. 75. Upon information and belief, USPS revoked CPUAA s status as an authorized CARS Label Roll supplier based on the force, threats and intimidation of IGI, under the instructions, authorization or based on acts of IGI s officers and directors, including Dajani. 76. IGI and/or Dajani instructed IGI help desk employees to refuse to provide service for the CARS System to any CARS CPU calling the help desk unless they had recently purchased CARS Label Rolls from IGI. 77. IGI and/or Dajani instructed IGI help desk employees to require the immediate purchase of IGI CARS Label Rolls before providing help, support, repair or replacement components to any CPU calling for service who had not recently purchased labels from IGI. 78. IGI and/or Dajani instructed help desk employees to disparage CPUAA CARS Label Rolls, and to instruct CPUs that any and all problems that they were having with the CARS System were caused by use of CPUAA CARS Label Rolls. 79. Specific instances of IGI misconduct include: a. On or about November 18, 2011, Jane DeCock at the Wild Harvest CPU in Arvada, Colorado contacted IGI s help desk regarding an issue she was having with one of her CARS Printers. The first question asked of Ms. DeCock by the 15

16 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 16 of 33 IGI employee was concerning the last time she had purchased CARS Label Rolls from IGI. The IGI representative informed her that IGI was the only approved provider under her contract with USPS. IGI refused to provide service or support for the CARS System unless she bought labels from IGI and sent in CPUAA CARS Label Rolls for testing. b. On or about November 28, 2011, Tiffany Miller, the CPU Manager at Mrs. B. s Consignment in Tustin, California, contacted the IGI help desk due to an issue with her postage printer jamming, and requested a new printer. She was asked if she was using CPUAA CARS Label Rolls, and she responded in the affirmative. She was then told by the IGI help desk technician that the jamming was caused by CPUAA labels, that her warranty on her postage printer was not valid, and that they would not send her a new postage meter unless she immediately purchased four IGI CARS Label Rolls at a price of $60 per roll, plus shipping and handling. She complied with this demand due to fear of not being able to operate during the very busy holiday season. IGI further demanded that she send in a CPUAA Label Roll so IGI could have it tested. c. On or about November 22, 2011, Stella Derby of the Ryder Mail Depot in Warm Mineral Springs, Florida contacted IGI regarding a problem with her printer. She was asked which CARS Label Rolls she was using, and she informed the IGI representative that she used IGI CARS Label Rolls. She was told that because she has not purchased labels rolls from IGI for over 11 months, her warranty was void and she would have to replace the printer herself. As a result of IGI s refusal 16

17 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 17 of 33 to provide assistance, her business was closed for days. CPUAA sent a loaner printer to her, which worked. Several days later, she received a printer from IGI, and began experiencing the same problem again. After again discussing the issue with the help desk, the problem was addressed through a software update. d. In late November and early December 2011, John Tartz, a CPU owner-operator in Castle Rock, Colorado attempted to return CARS Label Rolls previously purchased from IGI pursuant to its written return policy. IGI s controller 1) refused to provide a refund; 2) refused to provide a copy of the refund policy; 3) told him that he was going after Mr. Tartz personally and that he would make sure that IGI attack would negatively affect Mr. Tartz s personal credit; 4) stated that he would place a lien against Mr. Tartz personally and that he would get every dime out of Mr. Tartz somehow ; 5) stated that Mr. Tartz made a business decision not to order IGI s rolls and that he was going to make his own business decision and act on Mr. Tartz s credit and attach a lien against Mr. Tartz. Mr. Tartz was also told that IGI was the only approved supplier of CARS Label Rolls and that if Mr. Tartz made the decision to use less expensive rolls, then the Pitney Bowes machines Tartz used would not be covered for repairs or replacement, and that the costs of repair or replacement were $200 and $900, respectively. e. On or about December 12, 2011, a newly opened CPU in Texas was having problems setting up the CARS Printer. IGI asked who they were buying paper from, and they indicated that they only had the original CARS Label Rolls that 17

18 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 18 of 33 came with the CARS Printer. IGI refused to provide service unless they immediately purchased four CARS Label Rolls from IGI. 80. Upon information and belief, IGI threatened or refused to comply with the services, repair and replacement requirements of the IGI Contract on numerous other occasions, thereby refusing to supply all or a portion of the Tying Product, based on CARS CPUs failure or refusal to purchase the Tied Product from IGI. CPUAA Attempts to Mitigate Damages to CPUs and Offer an Alternative to the Required Tying Arrangement 81. CPUAA learned that IGI was refusing to provide replacement and repair of the CARS Printer as required under the IGI Contract. 82. CPUAA further learned that IGI was claiming exorbitant fees for repair or replacement of the CARS Printer, or refusing to provide help desk service or services at all, in some cases resulting in the closure of CPU locations for days. 83. The actual cost of replacement of the CARS Printer is approximately $265 to $455 dollars, depending on the quantity purchased. 84. In or about August and October, 2011, CPUAA, through a Citizen distributor, was able to locate approximately 40 CARS Printers, which it purchased. CPUAA was able to locate and began contract negotiations with an authorized repair service for Citizen printers. 85. CPUAA s purpose in purchasing these printers and attempting to engage an authorized Citizen printer repair service was to alleviate CPUs from being forced into continuation of the tying arrangement. 18

19 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 19 of IGI informed CPUs that the warranty on the CARS Printer was void based on the provision of USPS s contract with the CPUs stating that Use of any other provider [for CARS Label Rolls] will void the system warranty and the CPU Supplier will be liable for all costs incurred to repair CARS. Exhibit 1, Part 3 (Contracting Clauses), CPUAA was willing to provide repair and replacement services for CARS Printers under a program whereby it would provide a loaner printer to the CPU, and send the printer to an authorized Citizen repair service. 88. Through this mechanism, CPUs could choose an alternative to the tying arrangement by paying the actual cost of repair or replacement of the CARS Printer, an option not prohibited under the terms of the CARS CPU Contract. 89. CPUAA never introduced this program to Class members, and was prohibited from doing so by USPS and/or IGI. IGI and USPS Agree to Strengthen the Tying Arrangement 90. CPUAA attempted to work with USPS to reaffirm approval of CPUAA as an authorized supplier of CARS Label Rolls. 91. USPS maintained that Kelley, Manager Contract Postal Access Channels, did not have the authority to approve CPUAA or any other supplier of CARS Label Rolls for use with the CARS System. 92. CPUAA suggested the warranty program, described above, as an alternative to the illegal tying arrangement. 93. USPS stated that eliminating the tying arrangement, and requiring IGI to provide the CARS System without implementing the tying arrangement, was a matter within the sole 19

20 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 20 of 33 authority of the USPS Contracting Officer in charge of the IGI Contract, Charles Hochstein. USPS stated that No other person, besides the assigned IGI CO has the requisite legal authority to bind the Postal Service to spend money concerning contract matters involving the IGI contract. Exhibit Thus, even though USPS was not directly expending any money to purchase the Tied Product, which the CARS CPUs were required to purchase directly, USPS s position is that eliminating the tying arrangement would cause USPS to spend money under the IGI Contract. 95. Upon information and belief, IGI threatened to seek a contract adjustment or otherwise increase the prices paid by USPS to IGI under the IGI Contract if USPS did not continue and maintain the tying arrangement between the CARS System and required purchase of only IGI CARS Labels Rolls. 96. USPS is receiving a benefit from the Tied Product through receipt of discount, rebate or lower prices under the IGI Contract in the Tying Product in return for using its market power in the CARS CPU market to require that CPUs purchase CARS Labels Rolls only from IGI. 97. Upon information and belief, during the time period from July 2011 through December 12, 2011, IGI and Dajani took various actions to force USPS to agree to continue, buttress or reinforce the tying arrangement including but not limited to threats to refuse to (and actual refusal to) provide services, repair or replacements to CARS CPUs. 98. Upon information and belief, as early as December 9, 2011, IGI, with agreement and consent of USPS, was informing CPUs that: 1) CPUAA CARS Label Rolls were not officially approved, and 2) USPS would be issuing a statement to that effect soon. 20

21 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 21 of Upon information and belief, USPS through Charles Hochstein, Karren Vance, Karen Mastervich and unknown others, and IGI through Dajani and/or other officers and directors, agreed that USPS would issue a statement requiring that the tying arrangement continue This agreement was made in furtherance of an agreement, conspiracy or contract in restraint of trade, and for the purpose of continuing to monopolize or attempting to monopolize the CARS Label Rolls market On or about December 12, 2011, Charles Hochstein of USPS issued the following statement to all CPUs through the CARS System. Exhibit 6. The Postal Service reviewed the contract under which USPS leases the CARS systems from IGI in response to recent inquiries. We have concluded that: 1. IGI is the only approved CARS label provider. 2. IGI is solely responsible for the repair of the CARS printers. Effective immediately all CPUs, in accordance with your USPS contract, are directed by the Postal Service to purchase all CARS labels from IGI and to only return CARS equipment, including printers, to IGI for repair. The Postal Service and IGI are working to resolve reported CPU concerns and complaints relative to the CARS systems. Questions concerning this policy should be addressed to your local USPS Retail Specialist Since December 12, 2011, IGI and/or USPS have re-issued this message through the CARS messaging system on an almost daily basis. See Exhibit On or about December 12, 2011, Nicole Reiter-Noll, Retail Manager for the Colorado and Wyoming District of USPS, sent an to CARS CPUs, informing them that the 21

22 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 22 of 33 above message would be sent through the CARS System memo view announcement, and additionally stating, in relevant part: Exhibit 8. The purpose of this message is to establish USPS policy at this time. The CPU s compliance with this position from this point forward is not voluntary. The CPU contract includes the following requirement: The supplier will be responsible for purchasing supplies for CARS after the initial supply is exhausted. Label rolls must be ordered from USPS authorized CARS label providers. Use of any other providers will void the system warranty and the CPU Supplier will be liable for all costs incurred to repair the CARS label printer. By contract, the authorized source for CARS labels and equipment repair is IGI. Recent Postal Service messaging does not fully reflect this fact. Our current message does not reflect on any other supplier s labels or repair capabilities. This statement reflects the terms and conditions of a competitively awarded contract the Postal Service signed with IGI for the CARS system. Therefore, our Postal Retail team should not speculate or comment concerning why another supplier s product is or is not approved. The Tying Arrangement s Substantial Market Effects, Restraints on Trade and Monopolization 104. The non-sale price charged by IGI for CARS Label Rolls has ranged from $70 to $116 per roll since the inception of the IGI Contract, with occasional specials ranging from $55 to $65 per roll (varying with quantity purchased). Exhibit IGI charges shipping of $17.35 for 1 to 4 rolls, and $34.70 for shipping 5 to 8 rolls, in addition to delivery confirmation and insurance, for purchase of CARS Label Rolls, rather than charging only a pass-through for shipping, thereby increasing its profits on each sale. 22

23 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 23 of The introductory non-sale price charged by CPUAA for its CARS Label Rolls that have been certified as meeting or exceeding USPS Label Roll Specifications was $34.95 to $39.95, depending on purchase of membership and quantity of rolls purchased. Exhibit The price charged for known Non-Certified CARS Label Rolls are between $22.80-$34.00 (Modity, Inc.) and $32.95-$36.95 (SuperiorMeterSupplies), depending on quantity purchased IGI s current pricing is in shown in attached Exhibit 11. CLASS ACTION ALLEGATIONS 109. Plaintiffs seek to represent the following Class: All persons or entities within the United States (excluding federal, state and local government entities, USPS, IGI or their directors, officers and members of their families) that have a CARS CPU Contract with USPS to operate a CARS CPU The membership of the Class is so numerous that joinder of all members is impractical. There are approximately 1,500 or more members who are geographically dispersed throughout the United States Plaintiffs claims are typical of the claims of the members of the Class because Plaintiffs and all Class members were damaged by the same wrongful conduct of the Defendants alleged herein There are questions of law and fact common to the Class which predominate over any question affecting only individual Class members. Such common questions include: a. The definition of the relevant product markets; b. USPS s and/or IGI s market power in the relevant product markets; 23

24 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 24 of 33 c. Whether USPS and/or IGI monopolized, continue to monopolize, and/or have attempted to monopolize the relevant product markets; d. Whether the contractual conditions of the IGI and/or CARS CPU Contracts, individually and collectively, condition the sale, lease or provision of goods and services on not using or dealing in the goods of another with the effect of substantially limiting competition or restraining trade; e. Whether USPS and IGI s conduct caused damages to Plaintiffs and members of the Class, including the degree to which prices paid by the Class are higher than the prices that would have been paid in a market free from monopolization, restraints on trade, illegal tying arrangements and other illegal conduct The claims of Plaintiffs are typical of the claims of the Class, and Plaintiffs have no interests adverse to the interests of other members of the Class Plaintiffs will fairly and adequately protect the interests of the Class and have retained counsel experienced and competent in prosecution of complex class action and antitrust litigation A class action is superior to other available methods for the fair and efficient adjudication of the controversy. Class treatment will permit a large number of similarly situated persons and entities to prosecute their common claims in a single forum simultaneously, efficiently, and without duplication of efforts and expense that numerous individuals would engender. Class treatment will also permit the adjudication of relatively small claims by individual Class members who could not afford on their own to individually litigate an antitrust claim against these large corporate and governmental defendants. 24

25 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 25 of There are no difficulties likely to be encountered in the management of this class action that would preclude its maintenance as a class action, and no superior alternative exists for the fair and efficient adjudication of the controversy. COUNT I VIOLATION OF THE CLAYTON ACT, 15 U.S.C.A. 14 IGI (Conditioning Sale or Lease of CARS System on the Condition that the CARS CPUs not Use or Deal in the Goods of Another with the Effect of Substantially Lessening Competition and Creating a Monopoly) 117. Plaintiffs incorporate and re-allege paragraphs 1 to 116 of this Complaint as if fully set forth herein, on behalf of the Class Defendant IGI has conditioned the sale, lease and provision of the CARS System to CPUs including repair, replacement and servicing of each of its component parts as required under the IGI Contract (the CARS Tying Product ), to the purchase of CARS Label Rolls only from IGI IGI is the only manufacturer and supplier of the CARS Tying Product, and together with USPS has 100% economic power in the CARS Tying Product Competitors in the Tied Product are foreclosed, or substantially foreclosed, from selling CARS Label Rolls in the only market, to CARS CPUs The market for CARS Label Rolls is believed to be 3,000 to 6,000 rolls per month, all of which is affected by the tying arrangement At the price fixed by IGI of $70 to $75 per roll, affected commerce in the Tied Product is not insubstantial, and is estimated to range between $2,520,000 to $5,040,000 per year. 25

26 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 26 of The tying arrangement has caused, and will continue to cause, an anti-competitive effect Plaintiffs and CARS CPUs (the Class members), desire to purchase CARS Label Rolls from a source other than IGI. The Class members have and are purchasing IGI CARS Label Rolls because of the coercion by IGI and/or USPS through the tying arrangement As a direct and proximate result of the tying arrangement, Plaintiffs and all Class members have paid prices for CARS Label Rolls that are and were higher than they otherwise would have been in a competitive market As a direct and proximate result of the tying arrangement, Plaintiffs and all Class members suffered damages based on the supracompetitive prices paid for CARS Label Rolls in violation of the Clayton Act, 15 U.S.C.A. 14. COUNT II VIOLATIONS OF CLAYTON ACT, 15 U.S.C.A. 14 USPS (Conditioning Sale or Lease of CARS System and Other Products Necessary to Operate a CPU on the Condition that the CARS CPUs not Use or Deal in the Goods of Another with the Effect of Substantially Lessening Competition and Creating a Monopoly) 127. Plaintiffs incorporate and re-allege paragraphs 1 to 116 of this Complaint as if fully set forth herein, on behalf of the Class Defendant USPS has conditioned the right to contract to operate a CARS CPU on use of the CARS System, which it leased from IGI and distributes to CPUs (the CARS Tying Product ). USPS has also conditioned the right to sell or lease goods, wares, merchandise, machinery, supplies, or other commodities including, but not limited to, signage, furniture, collection boxes, and postage ( Other Tying Products ), (together with the CARS Tying Product the USPS Tying Products ), on the purchase of CARS Label Rolls exclusively from IGI. 26

27 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 27 of USPS is the only distributor of the USPS Tying Products, and together with IGI have 100% economic power in the CARS Tying Product, and 100% economic power in the Other Tying Products USPS has an economic interest in the Tied Product market Competitors in the Tied Product, CARS Label Rolls, are substantially foreclosed from selling label rolls to the relevant market, to CARS CPUs The market for CARS Label Rolls is believed to be 3,000 to 6,000 rolls per month, all of which is affected by the tying arrangement At the price fixed by IGI of $70 to $75 per roll, affected commerce in the Tied Product is not insubstantial, and is estimated to range between $2,520,000 to $5,040,000 per year The tying arrangement has caused, and will continue to cause, an anti-competitive effect Plaintiff and CARS CPUs (the Class members) desire to purchase CARS Label Rolls from a source other than IGI. The Class members have and are purchasing IGI CARS Label Rolls because of the coercion by IGI and/or USPS through the tying arrangement As a direct and proximate result of the tying arrangement, Plaintiffs and all Class members have paid prices for CARS Label Rolls that are and were higher than they otherwise would have been in a competitive market As a direct and proximate result of the tying arrangement, Plaintiffs and all Class members suffered damages based on the supracompetitive prices paid for CARS Label Rolls in violation of the Clayton Act, 15 U.S.C.A

28 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 28 of 33 COUNT III VIOLATION OF THE SHERMAN ACT, 15 U.S.C.A. 1 USPS, IGI AND DAJANI (Contract, Combination or Conspiracy in Restraint of Trade) 138. Plaintiffs incorporate and re-allege paragraphs 1 to 116 of this Complaint as if fully set forth herein, on behalf of the Class Defendant IGI has conditioned the sale, lease and provision of the CARS Tying Product to CPUs, including repair, replacement and servicing of each of its component parts as required under the IGI Contract, to the purchase of CARS Label Rolls (the Tied Product) only from IGI IGI is the only manufacturer and supplier of the CARS System Defendant USPS has conditioned the right to contract to run a CARS CPU on use of the CARS Tying Product, which it leased from IGI and distributes to CPUs. It has also conditioned to sell or lease goods, wares, merchandise, machinery, supplies, or other commodities including, but not limited to, signage, furniture, collection boxes, and postage (the Other USPS Tying Products), on the purchase of CARS Label Rolls (the Tied Product) exclusively from IGI USPS is the only distributor of the USPS Tying Products in the relevant market USPS and IGI together, through contract and in combination, have total market power in the CARS Tying Product and Other Tying Products in the relevant market, and through use of that power have restrained free trade in the Tied Product The market for CARS Label Rolls is believed to be 3,000 to 6,000 rolls per month, all of which is affected by the tying arrangement. 28

29 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 29 of At the price fixed by IGI of $70 to $75 per roll, affected commerce in the Tied Product is not insubstantial, and is estimated to range between $2,520,000 to $5,040,000 per year The actions taken by IGI, USPS, and Dajani, including but not limited to, the use of force, threats and intimidation, have caused an unreasonable restraint on trade in the market for the Tied Product, including but not limited to the Class member s ability to purchase the Tied Product at competitive prices and from suppliers of the Tied Product other than IGI The purpose and effect of USPS, IGI and Dajani s conduct has been a substantial lessening of competition in the Tied Product market As a direct and proximate result of these contracts, combinations, and conspiracies in restraint of trade, Plaintiffs and all Class members have paid prices for CARS Label Rolls that are and were higher than they otherwise would have been in a competitive market As a direct and proximate result of these contracts, combinations, and conspiracies in restraint of trade, Plaintiffs and all Class members suffered damages based on the supracompetitive prices paid for CARS Label Rolls in violation of the Sherman Antitrust Act, 15 U.S.C.A. 1. COUNT IV VIOLATION OF THE SHERMAN ACT, 15 U.S.C.A. 2 IGI, DAJANI AND USPS (Monopolization and Attempted Monopolization of the CARS Label Rolls Market) 150. Plaintiffs incorporate and re-allege paragraphs 1 to 116 of this Complaint as if fully set forth herein, on behalf of the Class. 29

30 Case 1:12-cv JLK Document 1 Filed 07/26/12 USDC Colorado Page 30 of Defendants IGI and Dajani, individually and combining or conspiring together with USPS, had the specific intent to monopolize the CARS Label Roll market, to control the price of CARS Label Rolls in the market, to set prices for the CARS Label Rolls at an unreasonably high level (thereby increasing their profits on sales thereof), and to destroy competition and restrict consumer choice in the CARS Label Rolls market throughout the United States Defendants IGI and Dajani, individually and combining or conspiring together, and together with USPS, engaged in predatory or anticompetitive conduct directed at accomplishing that purpose, including, tying and unreasonable exclusionary agreements Defendants IGI and Dajani have a dangerous probability of achieving monopoly power, and may have attained monopoly power, in the CARS CPU Label Roll market This conduct has harmed competition in the CARS Label Roll Market, making the supply and selection of available products lower than it would be in a competitive market and forcing consumers to pay higher prices than they would have in a competitive market As a result of IGI, Dajani and USPS s conduct, Plaintiffs and the Class members have suffered antitrust injury including paying prices for CARS Label Rolls that are and were higher than they otherwise would have been in a competitive market As a direct and proximate result of these contracts, combinations, and conspiracies to monopolize or attempt to monopolize, Plaintiffs and all Class members suffered damages based on the supracompetitive prices paid for CARS Label Rolls in violation of the Sherman Antitrust Act, 15 U.S.C.A