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Eastern District Of California Denies Motion To Dismiss Case Alleging Horizontal Price Fixing Conspiracy Of Real Property In Solano County
04/16/2024On March 28, 2024, Judge Troy L. Nunley of the United States District Court for the Eastern District of California denied a motion to dismiss a lawsuit alleging that California landowners conspired to drive up the price of properties in Solano County. Flannery Assoc. LLC v. Barnes Family Ranch Assoc., LLC et al., No. 2:23-CV-00927 (E.D. Cal. Mar. 28, 2024). The Court held that plaintiff had adequately alleged both direct and circumstantial evidence of a horizontal price-fixing agreement.
Plaintiff is a Delaware-based limited liability company that has been purchasing swathes of land in the Jepson Prairie and Montezuma Hills area of Solano County since 2018 with the stated aim of creating a “large holding of contiguous assembled property under common ownership” as the site of a planned sustainable community that could help solve California’s housing crisis. Defendants are landowners who allegedly took advantage of the above-market prices plaintiff was offering, and its position as the only purchaser of land in Solano County, to drive prices to even higher supracompetitive levels. Plaintiff alleged that defendants shared non-public information about prices and negotiations with one another and colluded on how much they should accept in return for their land.
In their motion to dismiss, defendants argued that: 1) the Sherman Act does not apply to conspiracies involving real property; 2) plaintiff did not establish antitrust standing under the Sherman Act; 3) plaintiff failed to allege defendants entered into an illegal horizontal price‑fixing conspiracy; 4) plaintiff failed to adequately allege its state law claims; and 5) plaintiff failed to allege liability against certain individual defendants.
The Court considered each of these arguments in turn. With respect to defendants’ argument that conspiracies involving real property are not covered by the Sherman Act, the Court disagreed. The Court noted that the Sherman Act prohibits “Every contract, combination in form of trust or otherwise, or conspiracy, in restraint of trade or commerce” and not just those involving commodified products. (Emphasis in original). Citing Supreme Court and Ninth Circuit precedent, the Court determined that conspiracies involving real property are covered by the Sherman Act.
Defendants also argued that plaintiff did not have antitrust standing because plaintiff had failed to establish that the conduct by defendants from which the alleged injury flowed was anticompetitive. Rather, they argued that their decision not to sell to plaintiff was, in fact, beneficial or neutral to competition because it prevented plaintiff from achieving monopolistic ownership of property in Solano County. The Court again disagreed, noting that the focus of an assessment of whether or not a plaintiff has suffered antitrust injury should be on the defendant’s conduct, not that of the plaintiff.
The Court also found that plaintiff adequately alleged a horizontal price-fixing agreement among defendants, noting that at the pleading stage, Twombly requires simply “enough factual matter (taken as true) to suggest that an agreement was made.” In this case, the Court found that there was enough in the direct communications cited in the complaint to create a plausible inference that certain defendants agreed to coordinate on how much to sell their land for and when would be the best time to do so. The Court conceded that the communications did not show defendants explicitly agreeing to not sell their land below a certain amount per acre, but noted that at the pleadings stage, a plaintiff need only “raise a reasonable expectation that discovery will reveal evidence of an illegal agreement,” which plaintiff had succeeded in doing here. Id. The Court also pointed to indirect evidence supporting the existence of an illegal agreement, such as parallel conduct coupled with the following “plus factors”: 1) a common motive among defendants to drive up prices; 2) actions against defendants’ own self-interest; and 3) the exchange of confidential information.
Since the Court found that plaintiff sufficiently alleged a Sherman Act claim, defendants’ attempts to dismiss plaintiff’s state law claims for the same reasons failed. The Court also refused to dismiss the complaint as to certain individual defendants. The Court again cited Twombly, noting that the plausibility standard only requires a plaintiff to plead enough to “give a defendant seeking to respond to allegations of a conspiracy an idea of where to begin, not to force a plaintiff to allege the entirety of the conspiracy before discovery.” The Court found that threshold had been met with regard to the individual defendants in this case.
The Court’s decision confirms that conspiracies under the Sherman Act should not be taken to apply only to commodities, or moveable property, but also apply to agreements to fix prices of real property. It also clarifies the level of specificity plaintiffs must plead with respect to each defendant in complex antitrust cases under Twombly.
Antitrust Litigation