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From Antitrust Law Daily, June 26, 2014

Aftermarket monopoly, price fixing claims against lighting system manufacturer dismissed

By Linda O'Brien, J.D., LL.M.

A company failed to sufficiently allege Sherman Act claims against a lighting control system manufacturer and one of its dealers for alleging engaging in an aftermarket monopoly and conspiring with other dealers to fix the prices of lighting control systems, the federal district court in Phoenix, Arizona has ruled (Pioneer Family Investments, LLC v. Lorusso, June 24, 2014, Rosenblatt, P.).

In 2010, Pioneer Family Investments entered into an agreement with dealer Shawn Lorusso, who did business as Selectric Systems, to install in a private residence a lighting control system manufactured by Lutron Electronics. Subsequently, Pioneer filed suit against Lutron and Selectric, alleging aftermarket monopoly and price fixing claims in violation of Section 1 of the Sherman Act, breach of contract, and fraud, among other claims. Specifically, Pioneer alleged that Lutron engaged in a conspiracy with its dealers (1) to retain control over the aftermarket sale of its lighting control systems, (2) to fix prices of its systems, and (3) to allocate the market for its products between its licensed dealers. Pioneer also alleged that Selectric failed to install the lighting control system correctly and refused to provide Pioneer with the software necessary to access the system to do repairs. Lutron and Selectric moved to dismiss the complaint.

Monopoly and price fixing claims. The court determined that Pioneer failed to adequately plead that Lutron and Selectric were engaged in an aftermarket monopoly. To state a claim for illegal tying, a plaintiff must allege that the defendant tied together the sale of two distinct products or services; the defendants possessed economic power in the tying product market to coerce customers to buy the tied product; and the tying arrangement affected a "not insubstantial volume of commerce" in the tied product market. In this case, Pioneer did not allege that Lutron, as opposed to its dealers, actually provided service or replacement parts for lighting systems in the aftermarket or that Lutron implemented a new policy after Pioneer's purchase of the system that tied Pioneer to its services. Pioneer also failed to state specific allegations regarding Lutron's economic power or the effect of the tying arrangement on commerce.

Pioneer's price fixing also failed, since Pioneer did not state sufficient allegations of Lutron's market power or injury to competition, according to the court. The mere fact that Lutron and its dealers communicated about prices was not sufficient to show an agreement on price or price levels that constituted a Sherman Act violation.

Arbitration clause. The court also found that Pioneer's claims against Selectric were barred by the binding arbitration clause in their contract. The contract between Pioneer and Selectic for the installation of the lighting control system contained a binding dispute resolution clause requiring arbitration as the method for dispute resolution. Since the parties selected arbitration as the sole method for dispute resolution and the terms of the dispute resolution clause were unambiguous, Pioneer's claims arising from the contract were governed by the clause. Finally, in rejecting Pioneer's argument that only the breach of contract claims were covered by the contract, the contract did not limit the type of disputes subject to the arbitration process. Thus, Pioneer's antitrust and fraud claims were also within the scope of the clause, the court concluded.

The case is No. 14-00594-PHX-PGR.

Attorneys: Dale B. Rycraft, Jr. (Davis Miles McGuire Gardner PLLC) for Pioneer Family Investments LLC. Jonathan Adam Dessaules (Dessaules Law Group) for Shawn N. Lorusso. Andrew Mark Federhar (Fennemore Craig PC) for Lutron Services Co. Inc., Lutron Electronics Co. Inc. and RLI Insurance Co.

Companies: Pioneer Family Investments LLC; Lutron Services Co. Inc.; Lutron Electronics Co. Inc.; RLI Insurance Co.

MainStory: TopStory Antitrust ArizonaNews

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