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International Association of Machinists and Aerospace Workers v. Verso Corp.

United States District Court, D. Maine

December 14, 2015

VERSO CORPORATION, et al., Defendants

          For INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS AFL-CIO LOCAL LODGE NO 1821, RICHARD GILLEY, Individually and as IAMAW District 4 Business Representative for Local Lodge 1821, COREY DARVEAU, Individually and as President of Local Lodge 1821, BRIAN SIMPSON, Individually and as Vice President of Local Lodge 1821, BRIAN ABBOTT, Individually and as Recording Secretary of Local Lodge 1821, HAROLD PORTER, Individually and as Financial Secretary for Local Lodge 1821, FIFTY-THREE LOCAL NO 1821 MEMBERS, Individually and for all other similary situated salaried and hourly wage employees, Plaintiffs: ISHAI MOOREVILLE, LEAD ATTORNEY, PRO HAC VICE, BAKER & MILLER PLLC, WASHINGTON, DC; JESSE MARKHAM, LEAD ATTORNEY, PRO HAC VICE, BAKER & MILLER LLP, SAN FRANCISCO, CA; KIMBERLY J. ERVIN TUCKER, LEAD ATTORNEY, LAW OFFICE OF KIMBERLY J. ERVIN TUCKER, LINCOLNVILLE, ME; DANA F. STROUT, LAW OFFICE OF DANA STROUT, ROCKPORT, ME; DONALD I. BAKER, PRO HAC VICE, BAKER & MILLER PLLC, WASHINGTON, DC.






         A paper company and scrap metal operator move to dismiss claims that the purchase and sale of a paper mill violates § 1 and § 2 of the Sherman Act and § 7 of the Clayton Act. The Court first concludes that the pending lawsuit is now moot because the sale has been fully consummated and even if the Plaintiffs have an abstract right, they have no realistic remedy. Next, if their claims are not moot, their Sherman Act claims must still fail because the Plaintiffs' critical allegations are conclusions of law, not statements of fact, and are not sufficient under Twombly [1] standards. Furthermore, despite their protests to the contrary, the Plaintiffs' Sherman Act claims are premised on the erroneous notion that the paper company had the legal obligation to sell the mill to a competitor. Finally, the Court rejects the Plaintiffs' Clayton Act claim because it is grounded in the incorrect contention that the Clayton Act covers a sale to a non-competitor as opposed to the acquisition of a competitor.

         I. BACKGROUND

         On December 15, 2014, the International Association of Machinists and Aerospace Workers AFL-CIO Local Lodge No. 1821 (IAMAW) and other individual Plaintiffs (collectively Plaintiffs) filed suit against Verso Paper LLC, now Verso Paper Corporation[2] (Verso), and AIM Development USA, LLC (AIM) claiming that an agreement entered into between Verso and AIM in which Verso agreed to sell its Bucksport, Maine mill to AIM violated federal antitrust law (Counts One, Two, and Three), the Clayton Act (Count Four), violated state of Maine antitrust law (Counts Five, Six, Seven, and Eight), and violated state of Maine severance and vacation pay law (Count Nine). Compl. for Declaratory and Injunctive Relief (ECF No. 1). On December 22, 2014, the Plaintiffs filed an amended complaint, which added Fifty-Three Local No. 1821 Members and included additional allegations. First Am. Compl. for Declaratory and Injunctive Relief (ECF No. 29) ( Am. Compl. ).

         The parties' initial focus was the Plaintiffs' claims for severance and vacation pay under Maine law. On January 6, 2015, the Court concluded that the state law claims belonged in state court and dismissed the portion of the Plaintiffs' amended complaint insofar as it sought relief under Maine law. Order Dismissing Pls.' Mot. for Declaratory and Injunctive Relief; and Dismissing Pls.' Mot. for Attach. And Trustee Process (ECF No. 73). The Court's decision did not sit well with the Plaintiffs. On January 20, 2015, the Plaintiffs filed a motion for reconsideration. Pls.' Mot. for Recons., Certification to the Maine Supreme Judicial Ct., or Certification of Appeal for Interlocutory Review of the Severance Pay Claims In Count 9 (ECF No. 97). On August 3, 2015, the Court denied the Plaintiffs' motion for reconsideration. Order Denying Pls.' Mot. for Recons. and Req. for Certification (ECF No. 133).

         Meanwhile, after the Plaintiffs filed a stipulation, dismissing the state antitrust counts, leaving only the federal antitrust claims along with the severance and vacation pay count, Stipulation of Voluntary Dismissal of Counts 5 Through 8 (State Antitrust Claims) of Pls.' First Am. Compl. (ECF No. 106), on March 2, 2015, the Defendants filed motions to dismiss the federal antitrust claims. Mot. of AIM Development (USA) LLC to Dismiss Pls.' First Am. Compl. (ECF No. 113) ( AIM Mot. ); Defs. Verso Paper Corp. and Verso Paper LLC's Mot. to Dismiss Pls.' First Am. Compl. for Declaratory and Injunctive Relief (ECF No. 114) ( Verso Mot. ). On March 23, 2015, the Plaintiffs filed their response. Pls.' Consolidated Resp. in Opp'n to Defs.' Separate Mots. to Dismiss Pls.' First Am. Compl. Pursuant to Rule 12(b)(6) (ECF No. 123) ( Pls.' Opp'n ). The Defendants responded on April 6, 2015. Reply Mem. of AIM Development (USA) LLC in Support of its Mot. to Dismiss Pls.' First Am. Compl. (ECF No. 128) ( AIM Reply ); Defs. Verso Paper Corp. and Verso Paper LLC's Reply in Support of Defs.' Mot. to Dismiss Pls.' First Am. Compl. for Declaratory and Injunctive Relief (ECF No. 129) ( Verso Reply ).


         A. The Defendants' Motions

         1. Verso's Motion

         In its motion, Verso observes that it sold the Bucksport mill to AIM on January 29, 2015 and claims that because it no longer owns the Bucksport mill, it " no longer has the legal right to possess or manipulate any of the mill's physical assets." Verso Mot. at 1-2. The effect of the sale, in Verso's view, is to erase the premise of the lawsuit because the Court is unable to " preserve a mill that Verso no longer owns and to prevent the sale of a mill that Verso already has sold." Id. at 2. Next, Verso argues that Count One, based on Section 1 of the Sherman Act, fails because Plaintiffs have not alleged the existence of a contract, combination, or conspiracy to restrain trade under Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2006). Id. Verso also argues that Counts Two and Three, based on Section 2 of the Sherman Act, are not actionable under Verizon Communications Inc. v. Law Office of Curtis V. Trinko, LLP, 540 U.S. 398, 124 S.Ct. 872, 157 L.Ed.2d 823 (2004). Id. Verso says the same is true of the Plaintiffs' claims in Count Four based on Section 7 of the Clayton Act because the Plaintiffs failed to allege " either that the sale of the Bucksport mill to AIM would lessen competition in the market where AIM competes or that the acquisition will harm competition." Id. Finally, Verso contends that if any of the federal antitrust claims are allowed to proceed, the Plaintiffs must be limited to claims as consumers, not employees. Id.

         2. AIM's Motion

         In its companion motion, AIM first observes that, because Counts One and Two are directed only against Verso, the only counts now pending against AIM are Counts Three and Four of the Amended Complaint. AIM Mot. at 1-2. AIM contends that the Plaintiffs' antitrust lawsuit is founded upon a faulty premise: " namely, that any reduction of capacity by a manufacturer or discontinuance of a manufacturing facility threatens competition because it reduces manufacturing supply and therefore might lead to higher prices." Id. at 3. AIM asserts that this theory " is incorrect as a matter of law." Id. Finally, AIM argues that the Plaintiffs' antitrust claims " are now largely moot." Id.

         3. The Plaintiffs' Response

         In their response, the Plaintiffs contend that four groups--Verso's parent, Apollo Global Management (Apollo); Verso and its entities; NewPage Holdings, Inc. (NewPage); and AIM--have all engaged in " known anticompetitive acts" demonstrating a " pattern of conduct" in violation of " Sections 1 and 2 of Sherman and Section 7 of Clayton." Pls.' Opp'n at 2. The Plaintiffs allege that Apollo acquired NewPage's debt and that it " used its acquisition of NewPage's second lien debt to exert improper influence over NewPage, to force a merger with Verso and to reduce capacity in the highly concentrated coated paper markets in North America in anticipation and preparation for that merger." Id. The Plaintiffs say that " [t]his acquisition and exertion of influence reduced competition and had the intent to further Verso's monopoly power over the North American coated paper markets, in violation of Sections 1 and 2 of the Sherman Act and Section 7 of the [C]layton Act." Id. Turning to AIM's role, the Plaintiffs maintain that AIM " was the instrument Verso and NewPage used to ensure that any reductions in capacity in these markets was permanent, by selling these mills to a scrapper rather than competitors willing to pay a higher price to continue to operate the mills in the production of coated paper products." Id.

         The Plaintiffs concede that they " did not name Apollo or NewPage as defendants in this action, nor did [they] challenge the merger of Verso and NewPage." Id. at 6. They explain that the " legality of the Verso-NewPage merger was the subject of a long-running, and on-going investigation by the Antitrust Division of the U.S. Department of Justice (DOJ)" and " [r]ather than attempt to undertake a challenge to the Verso-NewPage merger, Plaintiffs' antitrust counsel communicated Plaintiffs' concerns regarding the closure and scrapping of the Bucksport Mill to DOJ in early November, 2014" and " requested that DOJ condition the approval of the Verso-NewPage merger on divestiture of the Bucksport Mill and sale to a competitor." Id.

         The Plaintiffs argue that the sale of the Bucksport mill to AIM does not render their Amended Complaint moot because they contend that the Court retains the authority to " find the sale to AIM to be illegal and (i) order rescission of the Verso-AIM contract; or (ii) mandate divestiture of the Bucks[]port Mill as a going concern by AIM, so that the Mill could be sold to a Verso competitor or any new entrant into the coated printed paper market (e.g., a foreign paper maker or a North American producer of other paper products)." Id. at 27 (emphasis in original).

         The Plaintiffs turn to each of the Counts and maintain that their amended complaint survives dismissal. Id. at 29-41.

         4. Verso's Reply

         In its reply, Verso begins by characterizing the Plaintiffs' contentions:

The First Amended Complaint contains essentially three antitrust claims: (1) Verso and NewPage conspired to close the Bucksport mill in violation of Section 1 of the Sherman Act; (2) Verso attempted to monopolize the North American coated paper market (and conspired with AIM to do so) by selling the Bucksport mill to AIM in violation of Section 2 of the Sherman Act; and (3) Verso sold the Bucksport mill to AIM--a noncompetitor in the North American coated paper market--in violation of Section 7 of the Clayton Act.

Id. at 1. Verso then summarizes its response:

Verso moved to dismiss the [First Amended Complaint] because (1) all of Plaintiffs' claims against Verso are now moot; (2) the Section 1 claim fails because Plaintiffs do not satisfy the pleading standard set forth in Twombly ; (3) the Section 2 claims fail because Plaintiffs allege no conduct besides a purported refusal to deal with competitors, which is not a violation of the antitrust laws under Trinko ; and (4) the Section 7 claim fails because it is nothing more than an effort to make an end-run around Trinko.

Id. at 1-2. Contending that the Plaintiffs have sought to defend the Verso motion to dismiss by adding new allegations in their opposition brief, Verso asserts that the Plaintiffs have engaged in a " wholesale attempt" to " fundamentally change the nature of their case by and through their opposition to the pending motion to dismiss," which Verso says is " improper under Twombly." Id. at 3.

         Citing as authority Mad Men,[3] Verso accuses the Plaintiffs of attempting to " change the conversation" by making a series of allegations in their opposition that is not contained in their First Amended Complaint. Id. at 2 n.1, 4-9. First, Verso insists that the allegations about Apollo are " not properly before the Court because they are not in the [First Amended Complaint], nor are they relevant to the question of whether Verso, one of many portfolio companies that Apollo owns, conspired with NewPage to close the Bucksport mill." Id. at 5-6. Next, Verso expresses skepticism that the Plaintiffs have not claimed that Verso has refused to deal with a competitor as the refusal to do so is not a Section 2 violation under Trinko. Id. at 6-8. Third, Verso objects to the Plaintiffs' reference to Verso's acquisition of NewPage, rather than Verso's sale of the Bucksport mill to AIM. Id. at 8-9.

         5. AIM's Reply

         In its reply, AIM focuses on the Plaintiffs' asserted failure to respond to AIM's analysis of the Membership Interests Purchase Agreement (MIPA), where AIM contended that " AIM did not make the 'promise' to Verso that Plaintiffs allege AIM made, and on which their entire claim of conspiracy hangs--a promise that AIM would salvage the Mill." AIM Reply at 2. AIM points out that " it requires no conspiracy for AIM to agree to purchase a mill and then to salvage it; that is AIM's business." Id. at 2-3. AIM rejects the Plaintiffs' attempts to distinguish the Verso sale to AIM from Trinko. Id. at 3. Regarding the Clayton Act, AIM writes that the Plaintiffs " point to no case that says an asset owner violates the Clayton Act by selling its own asset to a non-competitor (or refusing to sell its own asset to a competitor)." Id. at 4.


         A. Motion to Dismiss

         When evaluating a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted, a court must determine " whether, construing the well-pleaded facts of the complaint in the light most favorable to the plaintiffs, the complaint states a claim for which relief can be granted." Ocasio--Herná ndez v. Fortuño-- Burset, 640 F.3d 1, 7 (1st Cir. 2011) (citing Fed.R.Civ.P. 12(b)(6)). A court need not assume the truth of conclusory allegations, and the complaint must state at least a " plausible claim for relief." Ashcroft v. Iqbal, 556 U.S. 662, 678-79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). However, " [n]on-conclusory factual allegations in the complaint must . . . be treated as true, even if seemingly incredible." Ocasio--Herná ndez, 640 F.3d at 12. A court may not " attempt to forecast a plaintiff's likelihood of success on the merits" . Id. at 13.

         In 2007, the United States Supreme Court issued Twombly, which emphasized the need for a plaintiff's complaint to marshal sufficient facts to demonstrate a " plausible entitlement to relief." 550 U.S. at 559. It is noteworthy that Twombly is an antitrust case in which the plaintiff claimed a violation of § 1 of the Sherman Act. Id. at 548. In stressing the need for plausibility, the Twombly Court observed that an antitrust action " can be expensive," id. at 558, and the Supreme Court worried that " the threat of discovery expense will push cost-conscious defendants to settle even anemic cases before reaching" the summary judgment or trial stages. Id. at 559.

         Two years later, in Iqbal, the United States Supreme Court refined the dismissal standard:

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. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.

556 U.S. at 678 (internal quotation marks and citations omitted). The Iqbal Court suggested that courts when considering motions to dismiss could " chose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id. at 679. Having isolated " the well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id.

         In 2013, the First Circuit described the Twombly and Iqbal decisions as " watershed cases." García-Catalán v. United States, 734 F.3d 100, 101 (1st Cir. 2013). The " plausibility standard," the First Circuit wrote, has become " the 'new normal' in federal civil practice." Id. (quoting A.G. v. Elsevier, Inc., 732 F.3d 77, 78-79 (1st Cir. 2013)). The First Circuit explained that " the plausibility inquiry necessitates a two-step pavane." Id. at 103 (citing Rodríguez-Reyes v. Molina-Rodríguez, 711 F.3d 49, 53 (1st Cir. 2013)). " First, the court must distinguish 'the complaint's factual allegations (which must be accepted as true) from its conclusory legal allegations (which need not be credited).'" Id. (quoting Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)). " Second, the court must determine whether the factual allegations are sufficient to support 'the reasonable inference that the defendant is liable for the misconduct alleged.'" Id. (quoting Haley v. City of Boston, 657 F.3d 39, 46 (1st Cir. 2011) (quoting Iqbal, 556 U.S. at 678)).

         B. The Complaint and Attached Documents

         In evaluating the sufficiency of a complaint, a court " must take the allegations in the complaint as true and must make all reasonable inferences in favor of the plaintiffs." Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993). See also Town of Barnstable v. O'Connor, 786 F.3d 130, 141 n.12 (1st Cir. 2015) (discussing Watterson ). " Ordinarily, of course, any consideration of documents not attached to the complaint, or not expressly incorporated therein, is forbidden, unless the proceeding is properly converted into one for summary judgment under Federal Rule of Civil Procedure 56." Watterson, 987 F.2d at 3 (citing Fed.R.Civ.P. 12(b)(6)). At the same time, there are " narrow exceptions" for " documents the authenticity of which are not disputed by the parties; for official records; for documents central to plaintiffs' claim; or for documents sufficiently referred to in the complaint." Id. at 3 (citations omitted). The Court has applied these restrictions in its review of the allegations and documents in this case.[4]

         C. Additional Facts

         In its motion, Verso contends that even though certain additional facts are not alleged in the Amended Complaint, the Court may and should consider them for purposes of ruling on the motion to dismiss. Verso Mot. at 5-6. These facts include: (1) that " the DOJ approved the Verso/NewPage transaction and, in doing so, concluded that Verso's decision to sell the Bucksport mill to AIM was unrelated to Verso's acquisition of NewPage" ; (2) that " Verso's acquisition of NewPage closed on January 7, 2015" ; and (3) that " Verso's sale of the Bucksport mill to AIM closed on January 29, 2015." Id. The Plaintiffs do not directly respond to Verso's assertion that the Court should consider these facts. However, regarding DOJ's approval of the Verso/NewPage transaction, the Plaintiffs attached to their response to the motion to dismiss a copy of DOJ's December 31, 2014 Competitive Impact Statement (CIS). Pls.' Opp'n Attach. 9 DOJ Competitive Impact Statement (ECF No. 123).[5] Accordingly, as the Plaintiffs and Verso both cite the DOJ's CIS, the Court has considered it under the Watterson exception for public documents. Similarly, the Plaintiffs and Verso agree that the Verso/NewPage merger took place on January 7, 2015 and that the Verso/AIM sale was completed on January 29, 2015. SeePls.' Opp'n Attach. 1 Factual Chronology, at 7 (ECF No. 123); Order Denying Pls.' Mot. for Recons. and Req. for Certification at 5-6 (ECF ...

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