UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

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1 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 BURNS, SCHALDENBRAND, RODRIQUEZ Cynthia B. Schaldenbrand, Esq. (SBN 00 Edward W. Burns, Esq. (SBN 0 Sportfisher Drive, Suite 0 Oceanside, California 0 ewburns@bsrlawyers.com Telephone: (0 - Facsimile: (0 - Attorneys for Plaintiffs, Debra Hosley, Amber Waves; Donna Elkins, Proverbial Pygmies; Barbara Crane, Critter Craze Ranch; Mike Heim, Citrus Lane Pygmies; Rhonda Moore, # Moore Kidd; Chelsea Bates, Picture Perfect Pygmies UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA DEBRA HOSLEY, AMBER WAVES; DONNA ELKINS, PROVERBIAL PYGMIES; BARBARA CRANE, CRITTER CRAZE RANCH; MIKE HEIM, CITRUS LANE PYGMIES; RHONDA MOORE, # MOORE KIDD; CHELSEA BATES, PICTURE PERFECT PYGMIES; v. Plaintiffs, NATIONAL PYGMY GOAT ASSOCIATION; and DOES TO, INCLUSIVE, Defendants. Case No. :-cv-000-h-blm OPPOSITION TO DEFENDANT S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED (FRCP (b( Complaint Filed: February, 0 (FRCP (b(

2 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 TABLE OF CONTENTS I. INTRODUCTION.... II. LEGAL STANDARD..... III. DISCUSSION.. A. UNREASONABLE RESTRAINT OF TRADE UNDER SECTION OF THE SHERMAN ACT. B. NPGA S UNLAWFUL MONOLPOLY UNDER SECTION OF THE SHERMAN ACT... C. PLAINTIFFS HAVE STANDING D. PLAINTIFFS STATE LAW CLAIMS STAND FOR THE REASONS STATED ABOVE NPGA TORTIOUSLY INTERFERED WITH PLAINTIFFS PROSPECTIVE ECONOMIC ADVANTAGE... IV. PLAINTIFFS REQUEST LEAVE TO AMEND THE COMPLAINT.. V. CONCLUSION.... i (FRCP (b(

3 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 TABLE OF AUTHORITIES Other Authorities An Overview of Horizontal Restraints, U. DAYTON L. REV. (... FEDERAL CASES Allied Tube & Conduit Corp. v. Indian Head Inc., U.S. (... Am.Soc y of Mech. Engr s v. Hydrolevel Corp., U.S. (... Ashcroft v. Iqbal, U.S., S.Ct., L.Ed.d... Bales v. Commissioner, WL 00 (U.S. Tax Ct. Oct.,... Bell Atlantic Corporation v. Twombly, 0 U.S., S.Ct., L.Ed.d (00.. Berkey Photo, Inc. v. Eastman Kodak Company, 0 F.d ( nd Cir.... Bogan v. Hodgkins, F.d 0, (d Cir.... Brennan v. Concord EFS, Inc., F. Supp. d (N.D Cal Broad. Music, Inc. v. Columbia Broad. Sys., Inc., U.S., S. Ct., 0 L. Ed. d (... Broadcom Corp v. Qualcomm Inc., 0 F.d (d Cir Cascade Health Solutions v. PeaceHealth, F.d (th Cir Copperweld Corp. v. Independence Tube Corp., U.S. (... Ernest W. Hahn v. Codding, F.d 0 ( th Cir Guillen v. Bank of America Corp. No. :-cv-0, 0 WL 0 (N.D. Cal Guyon v. Chinese Shar-pei Club of Am. Inc, F.d ( th Cir ii (FRCP (b(

4 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 In re High-Tech Employee Antitrust Litig., F.Supp.d (N.D. Cal In re IBM Peripheral EDP Devices Antitrust Litigation, F. Supp., (N.D. Cal.,, aff d F.d ( th Cir.,, cert denied, U.S., S.Ct. L.Ed.d (... Kolling v. Dow Jones & Co., ( Cal.App.d 0, Cal.Rptr.... Lacey v. Maricopa County, F.d ( th Cir Les Shockley Racing, Inc. v. Nat l Hot Rod Ass n, F.d 0, ( th Cir.... N. Tex. Spec. Physicians v. FTC, F.d ( th Cir , Nichols v. Spencer Int l Press, Inc., F.d ( th Cir... Nova Designs, Inc. v. Scuba Retailers Ass n 0 F.d ( th Cir OSU Student Alliance v. Ray, F.d ( th Cir Pecover v. Elecs. Arts Inc., F.Supp.d (N.D.Cal Poller v. Columbia Broadcasting, U.S., S.Ct., L.Ed. d (... Research in Motion Ltd. v. Motorola, Inc., F.Supp.d (N.D. Tex Roth v. Rhodes ( Cal.App. th 0 (0 Cal.Rpt.d 0... Saxer v. Philip Morris, Inc. Cal.App.d, Cal Rptr. ( th Dist.... Skilstaf, Inc. v. Caremark Corp., F.d 0 ( th circuit 0... Spectrum Sports Inc. v. McQuillan, 0 U.S., S.Ct., L.Edd (... Telex Corp. v. International Business Machins Corporation, F.d, - ( th Cir., Cert dismissed, U.S. 0, S. Ct., L.Ed.d (... iii (FRCP (b(

5 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 United States v. Aluminum Co. of America, F.d (d Cir.... United States v. Griffith U.S. 0,, S.Ct., L.Ed.... Usher v. City of Los Angeles, F.d ( th Cir.... Z-Tel Commc ns Inc. v. SBC Commc ns Inc., F.Supp.d (E.D. Tex FEDERAL RULES Fed. R. Civ. P. (a(... iv (FRCP (b(

6 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 PLAINTIFFS RESPONSE IN OPPOSITION TO DEFENDANT S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED I. INTRODUCTION Plaintiffs complaint for Violation of the Sherman Act Sections and, Cartwright Act, Lanham Act, and Interference with Business Relations properly states a claim for which relief can be granted because the Board of Directors of the NPGA ( The Board changed a year old rule permitting the registration of grey/brown agouti pygmy goats. The Board changed the rule to exclude such grey/brown agoutis from show competition and harming the breeders who have invested in developing, showing and selling these animals. Defendant National Pygmy Goat Association ( NPGA is the world s largest pygmy goat registry and membership organization and its board members were not negatively affected by this rule change. If the founders of the NPGA intended to exclude grey/brown agoutis, they would have created a rule at the association s creation. Plaintiffs, a group of breeders, relying on long standing rules have spent many years developing these colors. Their registered grey/brown goats have achieved success in the competition arena as well as the open market. NPGA registration is necessary for continued success. Defendants incorrectly argue that the gravamen of plaintiffs case is that over the course of several years, the proponents (NPGA members who do not breed grey brown agouti goats managed to persuade the Board to amend the breed standard, effectively excluding these grey/brown agoutis from registration.. Plaintiffs actually plead that the proponents are the majority of the board members who do not have these goats and are in the position to pass breed standard rules to their advantage, not simply NPGA general members who do not breed these goats. /// /// (FRCP (b(

7 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 II. LEGAL STANDARD When deciding a motion to dismiss under Rule (b(, a court must accept all factual allegations in the complaint as true and construe them in the light most favorable to the nonmoving party. Skilstaf, Inc. v. Caremark Corp., F.d 0, ( th circuit 0; OSU Student Alliance v. Ray, F.d, ( th Cir. 0; see also Guillen v. Bank of America Corp. No. :-cv-0, 0 WL 0 (N.D. Cal. 00. Moreover a court must draw all reasonable inferences in favor of the nonmoving party. Usher v. City of Los Angeles, F.d, ( th Cir.. 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 Lacey v. Maricopa County, F.d, ( th Cir. 0 (quoting Ashcroft v. Iqbal, U.S., (00. A complaint meets this standard when the plaintiff pleads factual content that allows the court to draw reasonable inference that the defendant is liable for the misconduct alleged. Id. Put another way, the Plaintiff need not establish a probability of success in the complaint, but the complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, U.S., S.Ct. at, L.Ed.d (emphasis added and internal quotations omitted. In Bell Atlantic Corporation v. Twombly, 0 U.S., S.Ct.,, L.Ed.d (00 the court explained that asking for plausible grounds to infer an arrangement does not impose a probability requirement at the pleading state; it simply calls for enough facts to raise a reasonable expectation that discovery could reveal evidence of an illegal arrangement, an antitrust claim may be dismissed only if no set of facts outlined by the complaint would justify relief. Les Shockley Racing, Inc. v. Nat l Hot Rod Ass n, F.d 0, 0 ( th Cir.. The Ninth Circuit has noted that there is a policy disfavoring the pre-trial dismissal of antitrust actions because the proof lies largely in the hands of the defendants. Ernest W. Hahn v. Codding, F.d 0, (FRCP (b(

8 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 ( th Cir. 0 (citing Poller v. Columbia Broadcasting, U.S.,, S.Ct., L.Ed. d (. Accepting the factual allegations as true and drawing all reasonable inferences in Plaintiff s favor, the court should deny Defendant s Motion to Dismiss for Failure to State a Claim. In the unlikely event the Court concludes the Complaint fails to state a claim, Plaintiffs respectfully request leave to amend in order to remedy any deficiency identified by the Court. The Court should freely give leave [to amend] when justice so requires. See Fed. R. Civ. P. (a(. Federal policy strongly favors determination of cases on their merits. Foman v. Davis ( US,, S.Ct., 0; Martinez v. Newport Beach City ( th Cir. Fd,. III. DISCUSSION A. UNREASONABLE RESTRAINT OF TRADE UNDER SECTION OF THE SHERMAN ACT Plaintiffs facts show an unreasonable restraint of trade under Section of Sherman Act. Section calls for a two step analysis: ( whether an arrangement is a contract, combination or conspiracy; and ( whether the contract combination or conspiracy unreasonably retrains interstate trade. Abraham & Veneklasen Joint Venture v. Am. Quarter Horse Ass n, :-CV--J, 0 WL (N.D. Tex. May, 0, Am. Needle Inc. v. National Football League, 0 U.S., 0 S.Ct. 0, 0, L.Ed.d (0.. The Complaint Properly Alleges that NPGA is a Conspiracy Because it is Controlled by Competitors with Interests to Ban Grey/Brown Agoutis. Defendants pose a conclusory argument regarding the first element by stating, as a matter of law, the NPGA and its Board cannot form a combination, or conspiracy. Defendants then cite to certain case law yet never assert as to why the Board in this case cannot form a combination or conspiracy. (FRCP (b(

9 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 One of the cases principally relied in Defendants motion is Hatley v. American Quarter Horse Association, a Fifth Circuit case. The recent and more relevant Quarter Horse case is Abraham & Veneklasen Joint Venture v. American Quarter Horse Association, 0 WL (N.D. Tex. May, 0. Abraham involved a new rule ( (a, banning registration of cloned horses. Id. at. In Abraham, the AQHA defendants argued that the AQHA modifies horse registration rules through its board of directors. Id. The court found that the AQHA is a conspiracy because it is in fact controlled by competitors with interests to ban clones. Id. at. The AQHA, acting through its board, agreed to maintain the newer rule (a. Similar to Abraham, Plaintiffs complaint states facts showing the adoption of a new rule by the Board. This new rule banned registration of Grey/Brown Agouti pygmy goats. Defendant NPGA makes the same argument as the AQHA defendants in Abraham by asserting that the decision was made through its board of directors and thus there was no violation. However, Plaintiffs allege the Board of the NPGA is comprised of people who have conflicting interests. The members of the Board own pygmy goats, compete in the same competitions, breed, register and sell pygmy goats. Therefore, using the Court s reasoning in Abraham, the NPGA is a conspiracy because it is controlled by these competitors with interests to ban grey/brown agoutis. The court in Abraham held that Quarter horse breeders control the board by both number and influence. Id. at. These breeders, whom have sharply opposed cloning are Plaintiff s potential competitors and have economic incentives to exclude clones to keep prices for their own horses high by avoiding competition against additional elite animals in breeding, sales etc. Id. Plaintiffs complaint alleges similar facts, (albeit pygmy goats, that the breeders in the Board who do not have the Grey/Brown Agouti in their herds have sharply opposed the Grey/Brown agouti, are Plaintiffs competitors, and have the same economic incentives to exclude those goats to keep prices high for their own goats. Removing a portion of the pygmy goat population limits the number of registered pygmy (FRCP (b(

10 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 goats, reducing the competition of supply, keeping prices high for those that removed that portion of pygmy goats. When an organization is controlled by a group of competitors, it is considered to be a conspiracy of it s members. N. Texas Specialty Physicians v. F.T.C., F.d, (th Cir. 00. For antitrust purposes, a trade association is an organization of people or firms in the same industry, organized for the purpose of collecting and disseminating data and information related to that industry. See Federal Trade Commission, Antitrust Guidelines for Collaborations Among Competitors, at - (00; Murray S. Moore, Trade and Professional Associations: An Overview of Horizontal Restraints, U. DAYTON L. REV., - ( Trade and standard setting associations are routinely treated as continuing conspiracies of their members. Allied Tube & Conduit. (citing Phillip E. Areeda, Antitrust Law, at (. In Plaintiffs complaint there are numerous facts showing that the NPGA sets breed standards which is a standard setting association. It is undisputed that NPGA is a trade association under this definition. According to it s own mission statement, the facts in the complaint, as well as in Defendant s own Motion, the NPGA collects and disseminates information about the pygmy goat industry generally, and specific pygmy goats by virtue of it s registration requirements. Courts have routinely treated breed associations like the NPGA as trade associations. In Bales v. Commissioner, the United States Tax Court noted that the American Shorthorn Association, which governs the shorthorn breed of cattle, was a trade association. Bales v. Commissioner, WL 00, at * (U.S. Tax Ct. Oct.,. The Ninth Circuit also noted that the Chinese Shar-Pei club of America, a breed registry for the Shar-Pei Club of America, was a trade association under Federal Antitrust laws. Guyon v. Chinese Shar-pei Club of Am. Inc, F.d ( th Cir. 0. Even though this issue was not litigated in Hatley (which Defendants use as a similar case to their position throughout the Motion, the Fifth Circuit discussed the facts and the law as if AQHA (FRCP (b(

11 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 were a trade association, and applied trade association guidelines to AQHA s conduct. Hatley F.d, n. (noting that litigation might have been avoided if the AQHA had followed procedural rules applicable to trade associations. In the complaint, Plaintiffs allege the Board of the NPGA is comprised of people who also have pygmy goats, compete in the same competitions, breed, register, and sell pygmy goats just as the other members of the NPGA do, including the Plaintiffs. As alleged in the complaint, the majority of these Board members conveniently do not own or breed the grey/brown agouti pygmy goat, which can no longer be registered. The Board s actions show that as a matter of pure numbers, excluding an entire portion of pygmy goats is clearly an economic incentive to keep prices for their own goats high by eliminating the competition. Defendant conveniently avoids the terms trade association in its motion avoiding the issue by simply stating the NPGA did not conspire with anyone. Defendant then references Hatley, There can be no conspiracy or agreement between a corporation and its officers and agents to violate antitrust law. Defendant is mistaken as to the applicability of the Hatley standard because the NPGA is not a corporation, they are a standard setting association. We therefore must assume for purposes of this Motion that Defendant is arguing the single entity protection argument under Copperweld. Copperweld Corp. v. Independence Tube Corp., U.S., (. The Court in Copperweld held, for purpose of Section, the coordinated activity of a parent and its wholly owned subsidiary do not create a conspiracy. Id. However, Copperweld does not apply to a trade association composed of multiple competitors. When an organization is controlled by a group of competitors, it is considered to be a conspiracy of its members. N. Tex. Spec. Physicians v. FTC, F.d, ( th Cir. 00. In contrast to Copperweld, there is no evidence that the NPGA manages or controls its members operations or that profits and losses are shared among all its members or between it and its members. Nor is there evidence that NPGA members have (FRCP (b(

12 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 a duty, either by law or by contract, to act solely in the best interest of the NPGA, as would be the case of a corporate agent otherwise as in Copperweld. Rather its members compete with each other and with Plaintiffs in the market for pygmy goats. Accordingly, single entity protection does not extend to the NPGA because there is evidence that the interests of the Board members do not align with those of the NPGA and that many, if not all, Board members had an incentive to exclude grey/brown agoutis. NPGA s economic interests are served by registering as many pygmy goats as possible so the entity can earn more money from registration fees, competitions, advertising and other sources. The single entity doctrine is destroyed by the Board s actions in excluding grey/brown agoutis from the NPGA registry because that action is not in the interest of all members. In addition, there is evidence to be shown that since inception of the plan to exclude these goats, there has been a significant decline in membership and the number of goats registered which is inherently not in the NPGA s economic interests. In Abraham, the Defendants argued that where alleged conspirators belong to and share a single entity s interests, their conduct is not concerted but independent. Abraham, 0 WL at. Agreements made within a firm can constitute concerted action covered by Sec when the parties to the agreement act on interests separate from those of the firm itself. Am. Needle, Inc. 0 U.S., 00. The court in Abraham found that the AQHA benefits financially by registering more horses, including clones, and allowing them into AQHA competitions. Abraham, 0 WL at. Here the NPGA benefits in the same way by including the grey/brown agouti in its breed standard as it was for years. The board members in Abraham and this action had an incentive to decrease competition by excluding the specific registrations. The correct analysis is not whether the board members compete directly with one another but whether the organization is controlled by members with substantially similar economic interests. Abraham 0 WL at. To support this argument Plaintiffs produced evidence that some prominent (FRCP (b(

13 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 Committee members expressed a vociferous desire to exclude clones to avoid competing against them. Id. In this case, Plaintiffs have shown facts that the proponent Board Members posted negative assertions about the grey/brown agouti on facebook and adopted a say no to tri-color motto. In addition, they presented a color workshop trying to persuade members that the grey/brown agouti is not really a pygmy goat and that it was fraudulently cross bred with another kind of goat. If Board members capture individual economic benefits separate and apart form [the AQHA s] as a result of the decisions they make for the [AQHA]. The [AQHA s] decisions thus affect each [member s] profits, Am Needle 0 U.S., 0. The Abraham Court goes further, The AQHA might benefit from more registrations, but most Board members likely benefit from fewer. Abraham 0 WL at. The Supreme Court and other Circuits agree that there is no immunity under Section when members of a trade association use the association to exclude rivals, and even if the doctrine could apply here, a motion to dismiss is improper because there are factual disputes as to whether the NPGA members were truly united with the NPGA in pursuing the interests of NPGA, as opposed to their own selfish interests. Excluding a portion of pygmy goats is contrary to NPGA s interests, limiting the number of registered pygmy goats, effectually limits the number of registered goats, thereby reducing competition of supply, thereby keeping prices high for the protection of those in the Board who compete against the grey/brown agoutis. In American Needle, the Supreme Court laid these concerns to rest by distinguishing the issue of whether participants in a joint venture or other collaborative activity are legally capable of conspiring within the meaning of the Sherman Act from the different issue of what legal standard to apply per se, rule of reason, or quick look once it has been determined that the requisite concerted action is present, which brings us to the second element of whether the contract combination or conspiracy unreasonably retrains interstate or foreign trade, Defendants argue that the Board reasonably adopted a (FRCP (b(

14 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 rule consistent with the Association s purpose.. A Rule Reason Analysis is Properly Decided on Summary Judgment Not Motion to Dismiss. Courts appropriately reject (b( motions based on arguments that the complaint should be dismissed because it fails to state a claim under a full rule of reason analysis as resolving the question applies after there is a factual record. See In re High- Tech Employee Antitrust Litig., F.Supp.d, (N.D. Cal. 0 (as the parties agreed, the Court need not decide now whether the per se or rule of reason analysis applies that decision is more appropriate on a motion for summary judgement ; Pecover v. Elecs. Arts Inc., F.Supp.d, (N.D.Cal. 00. Indeed, the cases on which Defendant relies addressed this issue at summary judgement or later. See Broad. Music, Inc. v. Columbia Broad. Sys., Inc., U.S.,, S. Ct.,, 0 L. Ed. d (; Bogan v. Hodgkins, F.d 0, (d Cir. ; Nichols v. Spencer Int l Press, Inc., F.d, ( th Cir. This is appropriate because determining which rule applies requires factual inquiry that is improper at this stage in the proceedings. Pecover F.Supp.d at ; See Brennan v. Concord EFS, Inc., F. Supp. d,, (N.D Cal 00 (on a motion to dismiss, declining to decide whether rule of reason applied because the question of whether the restraint is naked or ancilliary is quintessentially one of fact. Indeed, Defendants rule of reason argument invokes disputed facts.. Defendant s Reliance on the Business Judgment Rule Argument Necessarily Involves the Determination of Factual Issues. Defendant justifies its conduct under the business judgment rule. More appropriately for antitrust cases is whether the Board has a reasonable reason for their anticompetitive conduct. The cases Defendant relies upon in its argument involve Board of Directors in Corporations, not board of directors in a trade association. Defendant also fails to state the alleged legitimate business reason was for disqualifying the grey/brown (FRCP (b(

15 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 agoutis. In Hydrolevel the Supreme Court recognized that trade associations are rife with opportuinties for anticompetitive activity. Am.Soc y of Mech. Engr s v. Hydrolevel Corp., U.S., (. Given that an industry wide standard is in most respects exclusionary conduct harmful to competition, as it amounts to an implicit agreement not to manufacture, distribute or purchase certain types of products, the Supreme Court in Allied Tube cautioned that such action is permitted at all under antitrust laws only on the understanding that it will be conducted in a non-partisan manner offering procompetative benefits.. Allied Tube & Conduit Corp. v. Indian Head Inc., U.S., 0, 0- ( (emphasis added; Broadcom Corp v. Qualcomm Inc., 0 F.d, (d Cir. 00 (trade asscociation conduct that undermines the procompetative benefits of private standard setting runs afoul of Section. In other words because the very existence of standards is inherently anti-competative, the standard setting process must include safeguards against bias. Research in Motion Ltd. v. Motorola, Inc., F.Supp.d, (N.D. Tex. 00. When an entity side-steps these safeguards or a person with a clear economic interest biases the process there is injury to competition. See id. Thus under Allied Tube, a standard is exclusionary conduct unless it is conducted in a neutral, objective fashion and advances competition. Plaintiffs plead sufficient evidence of exclusionary conduct to meet this test. First, Plaintiffs have alleged facts that the board was comprised of individuals who also breed pygmy goats and are in competition with Plaintiffs. Defendents offers ex post facto and contradictory justifications for its conduct. Plaintiffs also allege that the Board members opposed the grey/brown agouti because they did not want to compete against them with the growing popularity of the grey brown agouti. Standard-setting, such as imposing restrictions on registration, is permissible to the extent they promote competition and are not used with anticompetitive purpose or effect. See Hatley, F.d at ; Allied Tube, U.S. at 0-. ( standard must (FRCP (b(

16 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 present procompetative benefits. In a Sherman Act section case, only a thourough analysis of each fact situation will reveal whether the monopolist s conduct is unreasonably anti-competative and thus unlawful Z-Tel Commc ns Inc. v. SBC Commc ns Inc., F.Supp.d, (E.D. Tex. 00. Unlike Hatley, a Motion to Dismiss is not proper because inquiries into the reasonableness of a defendant s restraint necessarily involves the determination of factual issues. B. MONOPOLIZATION Defendant alleges that the NPGA exercises no unlawful monopoly. To state a claim for monopolization a plaintiff must allege the elements as set out in cases such as, In re IBM Peripheral EDP Devices Antitrust Litigation, F. Supp., (N.D. Cal.,, aff d F.d ( th Cir.,, cert denied, U.S., S.Ct. L.Ed.d ( as follows: that the defendant was in possession of monopoly power in the relevant market; and either that the defendant has willfully acquired or maintained that power through exclusionary conduct or [citations] that the defendant used its monopoly power, whether lawfully or unlawfully acquired, to foreclose competition, to gain a competitive advantage, or to destroy a competitor [FN] FN: United States v. Griffith U.S. 0,, S.Ct., L.Ed. ; Berkey Photo, Inc. v. Eastman Kodak Company, 0 F.d ( nd Cir. ; Telex Corp. v. International Business Machins Corporation, F.d, - ( th Cir., Cert dismissed, U.S. 0, S. Ct., L.Ed.d (. In the alternative, to demonstrate an attempted monopolization a plaintiff must prove ( that the defendant engaged in anticompetitive conduct with ( a specific intent to monopolize and ( a dangerous probability of achieving monopoly power. Cascade Health Solutions v. PeaceHealth, F.d, (th Cir. 00 (citing Spectrum (FRCP (b(

17 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 Sports Inc. v. McQuillan, 0 U.S.,, S.Ct., L.Edd ( Plaintiffs have properly and adequately plead that the NPGA has monopoly power in the relevant pygmy goat market and that the NPGA has used its monopoly power to foreclose competition by among other things, pleading that the NPGA is the world s largest pygmy goat registry and membership organization; is controlled by a group of competitors; and modifies its rules through its board of Directors, which are also competitors in the pygmy goat industry. Plaintiffs have also alleged facts that NPGA s rules and it s breed standards control not only whether a particular pygmy goat can be registered or not, but also whether a goat is valuable or relatively worthless; what constitutes a economically viable pygmy goat is in the control of the NPGA; and the majority of the Board of Directors are those that do not own the Grey/Brown pygmy goat. The growing popularity of the Grey/Brown pygmy goat created competition in the show ring and sales markets for the board members that did not have that type of goat in their herds. NPGA asserts that mere possession of monopoly power is insufficient to constitute a violation of the Sherman Act Section : the defendant must have acquired or maintained the monopoly through the kind of predatory conduct described in elements ( and (.. However this is incorrect as is evident by the plain language of the complaint, and overlooks that this is an abuse of monopoly case and that specific anticompetitive intent is not an essential element of a monopolization claim that need be specifically pleaded. The law is clear that intent can be inferred from evidence of monopoly power plus exclusionary practices and Plaintiffs have unquestionably pleaded both. In monopolization cases, monopolistic intent can be inferred from the exclusionary conduct of a firm with monopoly power. United States v. Aluminum Co. of America, F.d, (d Cir. Defendant s only argument is that mere possession of monopoly power is (FRCP (b(

18 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 insufficient to constitute a violation of the Sherman Act, and focuses its argument solely on the second element of acquiring and maintaining the monopoly through predatory conduct, and the rule of reason analysis. Plaintiffs claims survive a motion to dismiss because they have plausibly alleged that Defendant s monopoly power has been abused by exclusionary conduct in that the new rule disqualifying grey/brown agoutis is an abuse of NPGA s monopoly in the market for pygmy goats because it has an adverse effect on competition. By controlling registrations, NPGA controls the supply of registered pygmy goats in every state and has sufficient market power to restrict competition and decrease output. The restriction limits the supply of registered pygmy goats thereby driving up the price and injuring consumers. The rule precludes competition and inhibits Plaintiffs efforts to compete by establishing unnecessary barriers to entry into the market. Denial of registrations has grave economic consequences to pygmy goat owners. The NPGA knows that by refusing to register Plaintiffs grey/brown agoutis it forecloses competition to Plaintiffs. C. PLAINTIFFS HAVE STANDING TO BRING ANTITRUST CLAIMS The frequently stated standing to sue is merely a rule that an action for violation of the antitrust laws may be maintained only by a party within the target area of the antitrust violation, and not by one incidentally injured thereby. Kolling v. Dow Jones & Co., ( Cal.App.d 0, - ( Cal.Rptr.. Defendants argue that plaintiff s and NPGA are not competitors. For all the reasons stated above, Plaintiffs and Defendants are obviously competitors in that they both breed, register and compete in the target pygmy goat market. Plaintiffs are injured by not being able to register previously registerable goats as a direct result of the new rule put into place by the NPGA through its Board of Directors who are in direct competition with Plaintiffs in showing, breeding, registering and selling pygmy goats. Not only are plaintiffs harmed but anyone in the pygmy goat market that has owns goats can no longer register, compete, (FRCP (b(

19 Case :-cv-000-h-blm Document Filed 0// Page of 0 0 breed or show them. The Cartwright Act does not confine its protection to consumers, purchasers, competitors, or sellers, but is comprehensive in its terms and coverage, protecting all who are made victims of the forbidden practices. Saxer v. Philip Morris, Inc. Cal.App.d, Cal Rptr. ( th Dist. D. PLAINTIFFS STATE LAW CLAIMS STAND FOR THE REASONS STATED ABOVE. There is overlap in the coverage of Federal antitrust law and the Cartwright Act, and both prohibit substantially the same conduct. The Cartwright Act, like the Sherman Act prohibits combinations for the purpose of restraining trade. A combination means a concert of action by individuals or entities maintaining separate and independent interests. Roth v. Rhodes ( Cal.App. th 0, (0 Cal.Rpt.d 0, internal citations omitted. The Ninth Circuit holds that analysis under the Cartwright Act mirrors analysis under federal law because the Cartwright Act was modeled after the Sherman Act. Nova Designs, Inc. v. Scuba Retailers Ass n 0 F.d, ( th Cir For the reasons stated above, Plaintiffs have adequately plead a violation of the Sherman Act and they have also adequately plead a Cartwright Act Violation.. NPGA tortiously interfered with plaintiffs prospective economic advantage. As a general rule, the determination of whether the defendant s conduct of interfering with existing contracts with third persons or prospective economic advantage comprises a factual issue to be decided upon all the circumstances of the case. Lowell v. Mother s Cake & Cookie Co., Cal.App.d, Cal.Rptr., -0 (. Plaintiff s have alleged that their current grey/brown agoutis that have been sold for a certain amount of money to third parties can now no longer be sold for that amount of money. Plaintiffs will show specific incidents where they have had to refund money for (FRCP (b(

20 Case :-cv-000-h-blm Document Filed 0// Page 0 of 0 0 the grey/brown agoutis sold that are now not able to be registered. IV. PLAINTIFFS REQUEST LEAVE TO AMEND Should the Court conclude the Complaint fails to state a claim, Plaintiffs respectfully request leave to amend in order to remedy any deficiency identified by the Court. The Court should freely give leave [to amend] when justice so requires. See Fed. R. Civ. P. (a(. Federal policy strongly favors determination of cases on their merits. Foman v. Davis ( US,, S.Ct., 0; Martinez v. Newport Beach City ( th Cir. Fd,. V. CONCLUSION Plaintiffs Complaint states plausible claims and contains sufficient facts and therefore Defendant s Motion to Dismiss should be denied. In the alternative, if the court grants Defendant s motion, Plaintiff s should be given the opportunity to amend their complaint. Respectfully submitted, Dated: April, 0 BURNS, SCHALDENBRAND, RODRIQUEZ By: /s/ Edward W. Burns EDWARD W. BURNS Attorneys for Plaintiffs, DEBRA HOSLEY, AMBER WAVES; DONNA ELKINS, PROVERBIAL PYGMIES; BARBARA CRANE, CRITTER CRAZE RANCH; MIKE HEIM, CITRUS LANE PYGMIES; RHONDA MOORE, # MOORE KIDD; (FRCP (b(