Case Number: EC064821 Hearing Date: July 29, 2016 Dept: NCB
MICHAEL S. DUFFY SR. v. DIAGNOSTIC LABORATORIES & RADIOLOGY
Case Management Conference
In his Complaint, the Plaintiff alleges that he provides medical laboratory services and that the Defendant has engaged in predatory pricing to obtain contracts and to drive the Plaintiff out of the marketplace.
CAUSES OF ACTION IN COMPLAINT:
1) Predatory Pricing
2) Intentional Interference with Prospective Economic Advantage
3) Restitution and Injunctive Relief
1. First Cause of Action for Predatory Pricing
The Defendant argues that this cause of action lacks the particular facts needed to plead a claim for predatory pricing under Business and Professions Code section 17043.
The Plaintiff’s claim for predatory pricing is based on the Unfair Practices Act, which is enacted at Business and Professions Code sections 17000 et seq. Section 17001 states that a purpose of the Unfair Practices Act is to foster and encourage competition by prohibiting unfair practices by means of which fair and honest competition is destroyed or prevented. Section 17043 makes it unlawful to sell any article or product at less than the cost thereof to the seller or to give away any article or product for the purpose of injuring competitors or destroying competition. Since this is a statutory claim, the pleadings must state with reasonable particularity the facts supporting the statutory elements of the violation. Khoury v. Maly’s of California, Inc. (1993) 14 Cal. App. 4th 612, 619.
In order to have a violation of section 17043, a sale below cost must occur. Independent Journal Newspapers v. United Western Newspapers, Inc. (1971) 15 Cal. App. 3d 583, 586-587. To plead the predatory pricing claim under section 17043, the plaintiff must allege defendant’s sales price, its cost in the product, and its cost of doing business. G.H.I.I. v. MTS, Inc. (1983) 147 Cal. App. 3d 256, 275, 211 (“the plaintiff must allege defendant’s sales price, its cost in the product and its cost of doing business”). The cause of action is not pleaded when it lacks these facts. See e.g., Rheumatology Diagnostics Lab., Inc. v. Aetna, Inc. (N.D. Cal. 2013) 2013 U.S. Dist. LEXIS 89208 (dismissing claim where “the Complaint makes no attempt to allege Quest’s sales prices, costs, or cost of doing business. Instead, it merely alleges that Quest’s capitated rate contracts are provided at ‘below cost'”).
A review of the Plaintiff’s first cause of action reveals that the Plaintiff alleges that the Defendant charges approximately $40 per film, that the Plaintiff’s costs are approximately $85 to $90 per film, and that the Defendant is charging less than cost. However, there are no allegations that allege the Defendant’s costs in the product or its cost of doing business. Further, the allegations demonstrate only that the Defendant is charging less than the Plaintiff’s cost, not the Defendant’s cost because there are no allegations that identify the Defendant’s costs in the product or its cost of doing business. Accordingly, the Plaintiff’s first cause of action lacks sufficient facts.
Therefore, the Court sustains the demurrer to the first cause of action. Since this is the original Complaint, the Court grant 15 days leave to amend.
2. Second Cause of Action for Intentional Interference with Prospective Economic Advantage
The Defendant argues that this cause of action does not plead sufficient facts. This cause of action has the following elements:
1) economic relationship existing between the plaintiff and third party;
2) probability of future economic benefit to the plaintiff;
3) defendant’s knowledge of the relationship;
4) defendant’s intentional acts designed to disrupt the relationship;
5) defendant engaged in an independently wrongful act in disrupting the relationship beyond just inducing disruption of economic advantage;
actual disruption of the relationship; and
6) economic harm to the plaintiff caused by the acts.
Salma v. Capon (2008) 161 Cal.App.4th 1275, 1290.
A plaintiff seeking to recover for an alleged interference with prospective contractual or economic relations must plead and prove as part of its case-in-chief that the defendant engaged in conduct that was wrongful by some legal measure other than the fact of interference itself. Della Penna v. Toyota Motor Sales, U.S.A. (1995) 11 Cal. 4th 376, 393. These torts are not intended to punish individuals or commercial entities for their choice of commercial relationships or their pursuit of commercial objectives, unless their interference amounts to independently actionable conduct. Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal. 4th 1134, 1158-1159. An act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard. Id.
The Defendant argues that the Plaintiff does not plead the essential element that the Defendant engaged in an independently wrongful act. The Plaintiff alleges in paragraphs 23 to 24 that the Defendant charged less than costs for its services when it charged $40 per film and that the Defendant did this to prevent the Plaintiff from obtaining a contract. This reveals that the Plaintiff is claiming that the independently wrongful act is the Defendant’s use of predatory pricing to obtain a contract. As discussed above, the Plaintiff did not plead sufficient facts to state a claim for predatory pricing because the Plaintiff has not pleaded facts regarding costs to demonstrate that the Defendant was engaged in wrongful pricing of its products, as opposed to competitive pricing. Accordingly, the Plaintiff has not pleaded sufficient facts to identify an independently wrongful act.
Further, there are no allegations that identify an existing economic relationship between the Plaintiff and a third party. The Plaintiff alleges that the Defendant’s bid for the contract with Plum was accepted by Plum; however, there are no allegations showing that the Plaintiff has an existing economic relationship with Plum or that the Defendant knew of this relationship. This is insufficient to plead the claim.
Therefore, the Court sustains the demurrer to the second cause of action. Since this is the original Complaint, the Court grants 15 days leave to amend.
3. Third Cause of Action for Restitution and Injunctive Relief
The Defendant argues that the Complaint does not plead any facts supporting these remedies. The third cause of action seeks the remedies of restitution and injunctive relief, but these are not a cause of action. See e.g., Shell Oil Co. v. Richter (1942) 52 Cal.App.2d 164, 168 (injunctive relief is a remedy and not in itself a cause of action).
In the third cause of action, the Plaintiff alleges that as a result of the Defendant’s wrongful conduct “as alleged above” the Plaintiff is entitled to restitution and an injunction. This does not plead any cause of action; instead, it is a conclusion to support the request for these remedies. This is grounds for a demurrer.
Therefore, the Court sustains the demurrer to the third cause of action. The Court does not grant leave to amend because this is not a cause of action; instead, the Court grants 15 days leave to include these remedies in any amendment to the other two causes of action, if appropriate.