REVISED MARCH 9, 2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
February 22, 2010
No. 09-50208 Charles R. Fulbruge III
Clerk
LINDSEY WAMPLER; MICHAEL J. PEACOCK,
Plaintiffs - Appellants
v.
SOUTHWESTERN BELL TELEPHONE COMPANY, doing business as
AT&T Southwest, doing business as AT&T Datacomm, doing business as
AT&T Texas; SBC ADVANCED SOLUTIONS, INC., doing business as AT&T
Advanced Solutions; AT&T, INC.; PARKMEED MALIBU CANYON LLC II;
PARKMEED MALIBU CANYON LLC; RICHARD H. MORAN; ROBERT S.
WELLS, as Trustee of the Wells Revocable Trust Dated July 2, 2002;
CHRISTA B. WELLS, as Trustee of the Wells Revocable Trust Dated July 2,
2002; CASTLE HILLS, L.P.; RENAISSANCE AT WEST AVENUE
APARTMENTS, L.P.; BUCA WEST AVENUE GENPAR, LLC; AT&T VIDEO
SERVICES, INC., doing business as AT&T Home Entertainment; GE-CWS
POOL, LLC,
Defendants - Appellees
Appeal from the United States District Court for the
Western District of Texas
USDC No. 1:07-CV-1039
Before REAVLEY, DAVIS, and STEWART, Circuit Judges.
REAVLEY, Circuit Judge:
No. 09-50208
Plaintiffs/Appellants sue for themselves and on behalf of a class of all
residents of multiple dwelling units ("MDUs") in five states who are limited to
voice, video, and Internet service by contracts with Defendant/Appellee AT&T.
The claim is that a single MDU is itself a relevant geographic market and for
that reason the contracts are in violation of § 1 of the Sherman Act.1 The district
court dismissed the case and we AFFIRM.
The owner of the MDU where Appellants live in San Antonio entered into
contracts, whereby AT&T was granted the exclusive right to provide video, voice
and broadband Internet ("Triple Play") services to MDU residents in exchange
for AT&T paying a "door fee" to the MDU owners. The contract also provides
AT&T with exclusive access to the copper wire, coaxial, and fiber optic cables
entering the MDU, thereby granting AT&T exclusive control to the "bottleneck"
through which all voice, video, and Internet services may enter the individual
residences.
Appellants filed this suit to claim that Appellees violated §§ 1-2 of the
Sherman Act because the contracts were both an illegal restraint on trade and
an attempt to monopolize the Triple Play services market. The district court
granted Appellees' motion to dismiss the case, holding that Appellants had failed
to demonstrate that their alleged geographic market was sufficient for antitrust
purposes.
We review a district court's ruling on a motion to dismiss de novo. See
Apani Sw. Inc. v. Coca-Cola Enters.2 Antitrust cases are not subject to a
heightened pleading standard. Bell Atl. Corp. v. Twombly.3 As in most cases,
a plaintiff must provide "a short and plain statement of the claim showing that
1
15 U.S.C. § 1.
2
300 F.3d 620, 624 (5th Cir. 2002) (citing Jackson v. City of Beaumont Police Dep't, 958
F.2d 616, 618 (5th Cir. 1992))
3
550 U.S. 544, 570, 127 S. Ct. 1955, 1974 (2007).
2
No. 09-50208
the pleader is entitled to relief . . . in order to give the defendant fair notice of
what the . . . claim is and the grounds upon which it rests."4 "Factual allegations
must be enough to raise a right to relief above the speculative level . . . on the
assumption that all of the complaint's allegations are true."5 Ultimately, a
plaintiff need only plead "enough facts to state a claim to relief that is plausible
on its face."6
Appellants appeal only the district court's dismissal of their claims based
on § 1 of the Sherman Act.7 In order to demonstrate a violation of § 1,
Appellants must allege that (1) AT&T and the Manor owners engaged in a
conspiracy, (2) the conspiracy had the effect of restraining trade, and (3) trade
was restrained in the relevant market.8 The first step in this analysis is
determining the relevant market, which itself is a function of the relevant
product market and the relevant geographic market.9
Appellants have alleged, and Appellees have not disputed, that the
relevant product market in this case is Triple Play services. The sole issue on
appeal is whether a single MDU (or MDUs in the aggregate) may plausibly be
considered a relevant geographic market for antitrust purposes.
4
Id. at 555, 127 S. Ct. at 1964 (internal cites and quotes omitted).
5
Id. at 555, 127 S. Ct. at 1965.
6
Id. at 570, 127 S. Ct. at 1974.
7
Section 1 of the Sherman Act states that "[e]very contract, combination in the form
of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States,
or with foreign nations, is declared to be illegal." 15 U.S.C. § 1.
8
See Apani, 300 F.3d at 627 (citing Spectators' Comm. Network Inc. v. Colonial Country
Club, 253 F.3d 215, 220 (5th Cir. 2001)).
9
See id.
3
No. 09-50208
In defining the relevant geographic market, this Court looks at "the area
of effective competition." Tampa Elec. Co. v. Nashville Coal Co.10 This is the
area "in which the seller operates and to which buyers can practicably turn for
supplies."11 In addition, the proposed market must "correspond to the
commercial realities of the industry and be economically significant." Brown
Shoe Co. v. United States.12 These "commercial realities" include "size,
cumbersomeness, and other characteristics of the relevant product" along with
"regulatory constraints impeding the free flow of competing goods into an area,
[such as] perishability of products, and transportation barriers."13 When
determining the "economic significance" of a proposed market, we look to
whether the proposed market is "'largely segregated from, independent of, or not
affected by’ competition elsewhere.'"14
In Apani, we held that the bottled-water business on city-owned facilities
in Lubbock, Texas, was not a plausible relevant market for antitrust purposes.
Specifically, we affirmed the lower court's holding that bottled water was not
limited by its size, cumbersomeness, or perishability to just the facilities owned
by the city.15 In addition, we affirmed the holding that bottled-water business
on those facilities was not economically segregated or insulated from the sale of
bottled water elsewhere in the city.16 In the instant case, the district court relied
10
365 U.S. 320, 328, 81 S. Ct. 623, 628 (1961).
11
Apani, 300 F.3d at 626 (citing Tampa Elec. Co., 365 U.S at 327, 81 S. Ct. at 628).
12
370 U.S. 294, 336-37, 82 S. Ct. 1502, 1530 (1962) (internal quotes omitted).
13
Apani, 300 F.3d at 626 (citations omitted).
14
Id. at 627 (quoting EARL W. KINTNER, FEDERAL ANTITRUST LAW: VOLUME IV THE
CLAYTON ACT SECTION 3; SECTION 7; MERGERS AND MARKETS § 38.2 (1984)).
15
Id. at 628-29.
16
Id. at 629.
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No. 09-50208
exclusively on this Court's ruling in Apani to conclude that Appellants' defined
market of a single individual MDU was too narrowly drawn. By comparing the
bottled-water business on city-owned facilities in Apani to the Triple Play
services business in a single MDU, the district court determined that "Plaintiffs'
alleged geographic market of MDUs essentially identifies specific venues
(collections of apartment homes) that simply narrow the broader economic
market in which these MDUs are located, which in this case is the City of San
Antonio." We agree.
There are obvious physical differences between an easily portable bottle
of water and the home-bound Triple Play services, such that the commercial
realities facing consumers of each product are different. However, we hold that
there are too many competitive forces bearing on a SmartMoves contract for a
single MDU to be sufficiently isolated and thus economically significant. First,
it is undisputed that MDUs compete with each other for a tenant's business.
Accordingly, an MDU owner has an incentive to provide the lowest cost and
highest quality services to attract a tenant's business. Second, it is also
undisputed that service providers such as AT&T compete with each other to
provide the Triple Play contracts in each MDU. It is therefore in the interest of
each service provider to provide lower-cost and higher-quality services than its
competitors in order to attract the MDU's business. Finally, when a tenant signs
a lease, that tenant has the opportunity to inquire into what services are
available at the MDU. Therefore, the cost and quality of Triple Play services
likely play a factor in where a tenant chooses to live. If a tenant does not like
the services of a particular MDU, that tenant can make other living
arrangements. See Hack v. President & Fellows of Yale Coll.17 Even if these
17
237 F.3d 81, 87 (2d Cir. 2000) (noting that if students forced to live on campus did not
like their living facilities, "they could matriculate elsewhere"), abrogated on other grounds by
Swierkiewicz v. Sorema N.A., 534 U.S. 506, 122 S. Ct. 992 (2002).
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No. 09-50208
SmartMoves contracts were imposed in the middle of a particular tenant's
lease,18 the modern leasehold rarely lasts more than a year, and a tenant is
therefore "locked in" to these services only for a brief time. Accordingly, given
the competition that exists between MDU owners, the competition that exists
between service providers, and given the highly mobile nature of today's society,
we cannot hold that a single MDU is so segregated as to be economically
significant and thus represents a plausible geographic market.19
Appellants have failed to properly allege a relevant geographic market and
their § 1 claim fails.
AFFIRMED.
18
Despite making such arguments in their briefs, Appellants made no allegations in
their complaint that any of them were "locked in" to SmartMoves contracts mid lease.
19
Appellants also point to various reports by the Federal Trade Commission declaring
that contracts similar to the SmartMoves contract result in higher costs and lower quality
services for MDU residents. Such reports do little to support Appellants' argument on appeal.
As Appellees point out and Appellants apparently concede, these reports provide no definition
of a relevant geographic market, because such an antitrust-specific definition is not directly
relevant to the FTC reports. While the FTC's conclusions are informative regarding the
anticompetitive nature of certain behavior, those conclusions are not dispositive of whether an
antitrust violation has occurred. See, e.g., Goldwasser v. Ameritech Corp., 222 F.3d 390,
399-400 (7th Cir. 2000) (violations of FTC enabling statutes do not equate with violations of
antitrust laws).
6