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From Antitrust Law Daily, May 9, 2014

Crane operator training facility adequately stated Cartwright Act claim against crane operator certification administrator

By Linda O’Brien, J.D., LL.M.

In an action by an owner of a crane operator training facility against an organization that administers crane operator examinations and certification programs for alleged engaging in an illegal boycott, the owner adequately stated a claim for relief under the Cartwright Act, the California Court of Appeal in Fresno has ruled. Thus, the trial court order sustaining the demurrer to the plaintiffs’ claims for Cartwright Act violations was reversed and remanded (California Crane School v. National Commission for Certification of Crane Operators., May 8, 2014, Kane, S.).

The National Commission for Certification of Crane Operators (NCCCO) is a nonprofit organization that administers crane operator examinations and certification programs in several states. International Assessment Institute (IAI) has contracted with NCCCO to develop and administer crane operator exams. John Nypl owns and operates California Crane School (CCS), a training facility for those seeking to pass NCCCO operator certification exams. NCCCO filed suit against CCS, after CCS improperly secured NCCCO exams and used them to train CCS students. To settle the action, CCS agreed to be subject to sanctions which precluded Nypl from acting as a test site coordinator and barred CCS from being listed as an approved training facility on the NCCCO website. Subsequently, CCS filed suit against NCCCO and IAI, alleging violations of the Cartwright Act, among other claims. CCS claimed that NCCCO and IAI blocked Nypl’s legitimate attempts to operate CCS despite the sanctions and their concerted refusals to deal with CCS constituted an illegal boycott. The trial court sustained demurrers to the Cartwright Act claims and a jury found in favor of NCCCO on the remaining claim. Nypl and CCS appealed.

Antitrust injury. The court found that the trial court erred in sustaining the defendants’ demurrer to the plaintiffs’ antitrust cause of action. To state a cause of action under the Cartwright Act, a plaintiff must allege the formation and operation of a conspiracy, illegal acts done pursuant to the conspiracy, and damage proximately caused by the acts. CCS and Nypl alleged that NCCCO, IAI, and other crane school operators conspired to fix tuition prices for crane operator training schools and, when CCS and Nypl refused to join the conspiracy, CCS was boycotted and refused access to NCCCO testing services which were essential to crane operator certification. CCS and Nypl adequately alleged an injury to their business and property by reason of the defendants’ conspiracy to engage in a group boycott against them for anticompetitive reasons, according to the court. The alleged refusal to allow CCS students access to NCCCO testing because CCS and Nypl refused to participate in the price-fixing agreement is the type of trade restraint and public harm that the Cartwright Act prohibits.

Indirect injury. CCS and Nypl were not required to allege a right to be accredited as a testing agent for NCCCO. Their allegations that the defendants conspired to bar the plaintiffs from access to testing services for anticompetitive reasons, which resulted in reduced competition in the crane operator training school market, were sufficient to show direct injury, the court noted.

Conspiracy. The plaintiffs sufficiently alleged the formation of a conspiracy to restrict trade in the crane operator training school market, according to the court. While a conspiracy must be stated in more than conclusory terms, the plaintiffs' allegations that the NCCCO, IAI, individuals, and unnamed crane operator training schools who make up and control NCCCO were members of the conspiracy was sufficient regarding the formation and membership of the conspiracy. Moreover, the plaintiffs’ allegations that NCCCO, IAI, and the crane schools agreed among themselves to refuse to test students from CCS were sufficient to show the operation of the conspiracy.

Injury to competition. The court also found that the plaintiffs adequately alleged an injury to competition. The plaintiffs claimed that the defendants’ activities severely constrained CCS, which was the largest crane school in California; there was less competition in the market; and the crane school market was subject to artificially inflated prices and noncompetitive services. The plaintiffs were not required to show actual harm to competition, rather they were required to show that they were injured by the anticompetitive aspects of the defendants’ conduct, the court noted.

Market power. An antitrust plaintiff must delineate a relevant market and show that the defendant played enough of a role in that market to impair competition significantly. The plaintiffs alleged that NCCCO was the only entity providing essential testing services that were required to compete in the crane operator training school market. As a result, the defendants were able to eliminate competition in the market. Those allegations were sufficient to show that the defendants played enough of a role in the market to impair competition significantly, the court concluded.

The case is No. F063727.

Attorneys: Joseph M. Alioto (Alioto Law Firm) and Jamie Miller (Law Offices of Jeffery K. Perkins) for California Crane School and John Nypl. James M. Dombroski (Law Offices of Jeffery K. Perkins) for Timothy Maxwell, Jared Maxwell, Vladimir Npyl, and Joshua Larsen. John N. Zarian (Parsons Behle & Latimer) for National Commission for Certification of Crane Operators.

Companies: California Crane School; National Commission for Certification of Crane Operators; International Assessment Institute

MainStory: TopStory Antitrust CaliforniaNews

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