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Ervin Equipment Inc. v. Wabash National Corp.

United States District Court, N.D. Indiana, LaFayette Division

January 31, 2017




         This case involves an attempted termination of a dealership agreement between a manufacturer of semitrailers, Wabash National Corporation, and Ervin Equipment, Inc., one of its dealers. Ervin brought this action to stave off the impending termination. Wabash has responded with two counterclaims: the first alleges that this is a “sham” litigation brought for an impermissible purpose; relatedly, the second counterclaim is for abuse of process. Ervin seeks the dismissal of these two counterclaims. Because these counterclaims fail to state a claim under Federal Rule of Civil Procedure 12(b)(6), the motion [DE 56] is granted.

         Factual Background

         I have already set forth the underlying facts of this case in my opinion and order dated May 17, 2016, denying Ervin's motion for preliminary injunction and granting in part and denying in part Wabash's motion to dismiss. [DE 36 at 2-6.] As such, I will only briefly discuss the background for this motion.

         Ervin originally filed a complaint and amended complaint asserting three claims against Wabash for its alleged violation of various Indiana statutes related to the manner in which it sought to terminate the Dealership Agreement. [DE 1, 16.] Wabash responded with a motion to dismiss. [DE 20.] I dismissed two of Ervin's three claims, but found that Ervin's complaint did state a proper claim under the Indiana unfair practices statute, Ind. Code § 9-32-13-27. [DE 36 at 8-13.] In essence, I found that Wabash needed to provide proper notice before terminating the dealership agreement and that such a termination could only be based on good cause- both of which are questions of fact to be determined by the jury. But I also found in that same order that Ervin's motion for a preliminary injunction did not meet the standards under Rule 65, and thus I refused to force Wabash to continue the Dealership Agreement pending a final determination in the case.

         Ervin then filed a motion for leave to file a second amended complaint. Ervin sought to add a claim under the Sherman Act alleging a conspiracy among Wabash and certain Wabash dealers to terminate Ervin and impose illegal territorial restraints on Wabash dealers. [DE 26.] Magistrate Judge Paul R. Cherry, applying the same standard as on a Rule 12(b)(6) motion, held that Ervin alleged sufficient facts to state its antitrust claim and thus allowed the second amended complaint to go forward. [DE 50.]

         Wabash filed an answer to the second amended complaint, and also filed two counterclaims. [DE 53, 54.] The document is entitled “Counterclaims of Defendant Wabash National for Sham Litigation and Abuse of Process.” [DE 54.] The first counterclaim-for sham litigation and violation of federal and state antitrust laws- alleges that Ervin has used this litigation “to intimidate, harass and eliminate competition in the market for used dry van semitrailers, ” that Ervin's conduct violates 15 U.S.C. § 2 and Ind. Code §24-1-1-1 et seq., and that the sham litigation has harmed Wabash and competition. [DE 54 at 10-11.] The second counterclaim alleges that Ervin has committed an abuse of process by asserting its claims “for an ulterior and improper purpose” and its actions constitute a “misuse and misapplication of process.” [DE 54 at 11-12.]


         Ervin moves to dismiss Wabash's counterclaims under Federal Rule of Civil Procedure 12(b)(6). To survive the motion, the counterclaims “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009) (internal quotation marks and citations omitted); accord Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While I must accept as true all factual allegations in the counterclaims and draw reasonable inferences in favor of Wabash, I am not required to accept “threadbare recitals of a cause of action's elements, supported by mere conclusory statements.” Iqbal, 556 U.S. at 663; see also McCauley v. Chicago, 671 F.3d 611, 616 (7th Cir. 2011). Indeed, Wabash must allege “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Making the plausibility determination is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 663-64.

         Count 1 - Sham Litigation/Attempt to Monopolize

         Count 1 is entitled “sham litigation in violation of federal and state antitrust law.” [DE 54 at 10.] Wabash alleges that Ervin knew it had no basis to allege a breach of contract, had little hope of surviving a dispositive motion on the related claims, and made up fictitious “facts” to support the Sherman Act claim. [DE 54 at 2-7.] Wabash also specifically alleges Ervin's conduct has violated 15 U.S.C. § 2 and Ind. Code § 24-1-1-1 et seq. [Id. at 11.] This counterclaim fails for two main reasons: (1) Ervin's claims are not “objectively baseless” so as to constitute “sham litigation” outside the protection of the Noerr-Pennington doctrine; and (2) Wabash did not plead plausible facts to show that Ervin's lawsuit constitutes an “attempt to monopolize.” “Sham litigation” is not a claim by itself, but rather an exception to the Noerr-Pennington doctrine. Noerr-Pennington provides immunity under the First Amendment to Ervin from having an antitrust claim asserted against it based on its petitioning this court for relief. Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961). However, the doctrine does not provide antitrust immunity to “sham” lawsuits.

         The Supreme Court outlined a two-part definition of sham litigation to determine whether the party is entitled to immunity under Noerr-Pennington. First, to be a sham, the suit “must be objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits.” Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60 (1993). Second, “the court should focus on whether the baseless lawsuit conceals an attempt to interfere directly with the business relationships of a competitor, through the use of the government process -as opposed to the outcome of that process-as an anticompetitive weapon.” Id. at 60-61 (emphasis in original, citations and quotations omitted). “Only if challenged litigation is objectively meritless may a court examine the litigant's subjective motivation.” Id. at 60.

         While the question of whether litigation is a sham could be a fact question for the jury, as the Supreme Court explained in Professional Real Estate Investors, where “there is no dispute over the predicate facts of the underlying legal proceeding, a court may decide probable cause [and thus Noerr-Pennington applicability] as a matter of law.” Professional Real Estate Investors, 508 U.S. at 63. The “classic” example of sham litigation is “the filing of frivolous objections to the license application of a competitor, with no expectation of achieving denial of the license but simply in order to impose expense and delay.” City of Columbia v. Omni Outdoor Adver., Inc., 499 U.S. 365, 380 (1991) (citation omitted).

         Here, Ervin's claims are not objectively baseless. While I dismissed two of the three claims in the original complaint and denied the motion for preliminary injunction, those rulings were not slam dunks. Rather, they required a significant amount of research and analysis. And, in analyzing whether to grant Ervin's motion to amend the complaint, Magistrate Judge Cherry conducted an extensive analysis under the same standard as Rule 12(b)(6), and found Ervin could properly amend the complaint and state a claim for relief under the Sherman Act. Thus at this stage in the proceedings, Ervin has two claims that were challenged and still remain pending (for violation of the Indiana unfair ...

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