This case is about telescopes and antitrust law. Plaintiff Optronic Technologies, Inc. (“Orion”) has brought claims under Sections 1 and 2 of the Sherman Act, Section 7 of the Clayton Act, California’s Unfair Competition Law (“UCL”), and California’s Cartwright Act against Defendants Ningbo Sunny Electronic Co., Ltd. (“Sunny”), Sunny Optics, Inc. and Meade Instruments, Inc. (“Meade”) (collectively “Defendants”). The court has federal question jurisdiction over Orion’s federal law claims pursuant to 28 U.S.C. §§ 1331 and 1337, and Orion’s state law claims under the Court’s supplemental jurisdiction provided by 28 U.S.C. § 1367. Orion moves for summary judgment on its claims under Section 1 of the Sherman Act, Section 7 of the Clayton Act, and the California laws. Defendants cross move for summary judgment on all of 21 Defendants’ claims. The court has considered the parties’ papers1 and their oral argument. The 22 court denies Orion’s motion, and grants in part and denies in part Defendants’ motion.2 23

24 1 The court admonishes both parties for violating the court’s Standing Order for Civil Cases. The 25 parties are reminded that they are required to read and comply with the Standing Order and the Civil Local Rules. Going forward, the court will strike non-compliant filings. 26 2 The court has filed this order under seal because it contains material subject to sealing orders. Within seven days of the filing date of this order, the parties shall provide the court a stipulated 27 Case No.: 5:16-cv-06370-EJD 1 I. Factual Background 2 The constellation of stars in this litigation is as follows: Orion is a brand and distributor of 3 telescopes and other optical products. Orion does not manufacture its products, but largely 4 imports them. Sunny is a Chinese telescope manufacturer. It has two subsidiaries: Meade and 5 Sunny Optics, Inc. Sunny acquired Meade in 2013. Meade manufactures and distributes 6 telescopes. Sunny’s principal is Peter Ni. Prior to this case, Orion entered into a settlement 7 agreement with several other entities in the telescope manufacturing and marketing universe.

Three of the parties to the “Settlement Agreement” (Caseria Ex. 40) are Suzhou Synta Optical 8

Technology Co. Ltd (“Suzhou Synta”), Synta Technology Corp. (“Synta Tech), and Celestron 9

Acquisition LLC (“Celestron”) (collectively, the “Synta Entities”). Celestron, a subsidiary of 10 Suzhou Synta is, by far, the largest distributor of telescopes in the United States. Defendants 11 contend that Suzhou Synta is a Chinese telescope manufacturer and that Synta Tech, another 12 subsidiary, is an importer of Suzhou Synta’s telescopes. The nature of the relationship between 13 Suzhou Synta and Synta Tech is disputed by the parties. David Shen is the principal of the Synta 14 Entities. Suzhou Synta and Sunny are the largest manufacturers of telescopes sold in the United 15 States.

16 In early 2013, Meade became available for acquisition. Orion bid $4.5 million on Meade, 17 but Meade announced that it had entered into a merger agreement with a third-party Jinghua 18

Optics & Electronics (“JOC”). In the weeks following that announcement, Sunny made an 19

unsolicited bid of $5.5 million, which Meade accepted. Sunny and Meade closed their deal in July 20 2013. In 2014, Orion attempted to acquire various assets, including valuable URLs, from 21 Hayneedle, an online retailer (the “Hayneedle Assets”). The deal fell apart for disputed reasons. 22 Until 2016, Orion marketed and sold telescopes manufactured by Sunny and by Synta 23 Suzhou. Orion purchased telescopes made by Sunny through an individual named Joyce Huang, 24

25 redacted version of this order, redacting only those portions of the order containing or referring to 26 material for which the court has granted a motion to seal and for which the parties still request the material be sealed. The court will then issue a redacted version of the order. 27 Case No.: 5:16-cv-06370-EJD 1 who works for the Synta Entities. After the Synta Entities and Orion executed the Settlement 2 Agreement, Orion sent a demand letter to Defendants. In response, Sunny ceased selling Orion its 3 telescopes. Orion filed this litigation in November of that year. 4 II. Legal Standard 5 Summary judgment is appropriate “if the pleadings, the discovery and disclosure materials 6 on file, and any affidavits show that there is no genuine issue as to any material fact and that the 7 movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). A fact is “material” where it would affect the outcome of the case, and a dispute is “genuine” where a reasonable fact 8 finder could decide for either party. O’Brien as Tr. of Raymond F. O’Brien Revocable Tr. v. XPO 9 CNW, Inc., 362 F. Supp. 3d 778, 782 (N.D. Cal. 2018). “In considering a motion for summary 10 judgment, the court may not weigh the evidence or make credibility determinations.” Id. 11 (quotations and citation omitted). The court must draw all reasonable inferences in favor of the 12 nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). 13 A court may grant summary judgment on an entire claim or defense, or on a “part of each claim or 14 defense.” Fed. R. Civ. P. 56(a). “If the court does not grant all the relief requested by the motion, 15 it may enter an order stating any material fact—including an item of damages or other relief—that 16 is not genuinely in dispute and treating the fact as established in the case.” Fed. R. Civ. P. 56(g). 17 III. Discussion 18 A. Defendants’ Acquisition of Meade 19 Orion first argues that Sunny violated Section 1 of the Sherman Act by conspiring with the 20 Synta Entities to acquire Meade. Defendants contend that Orion lacks both the Article III standing 21 and the antitrust standing required for it to bring this claim. “For Article III purposes, an antitrust 22 plaintiff establishes injury-in-fact when he has suffered an injury which bears a causal connection 23 to the alleged antitrust violation.” In re Online DVD-Rental Antitrust Litig., 779 F.3d 914, 922 24 (9th Cir. 2015) (citation and quotations omitted). A private antitrust plaintiff must demonstrate an 25 antitrust injury, which consists of (1) an “injury of the type the antitrust laws were intended to 26 prevent that also (2) flows from that which makes defendants’ acts unlawful.” Id. (quotations 27 Case No.: 5:16-cv-06370-EJD 1 omitted). Once a plaintiff has established standing, the elements of a claim under Section 1 are: 2 (1) a contract, combination, or conspiracy (2) “that unreasonably restrained trade under either a 3 per se rule of illegality or a rule of reason analysis; and (3) that the restraint affected interstate 4 commerce.” Solyndra Residual Tr. ex. rel. Neilson v. Suntech Power Holdings Co., 62 F. Supp. 5 3d 1027, 1039 (N.D. Cal. 2014) (citing Tanaka v. Univ. of S. Cal., 252 F.3d 1059, 1062 (9th Cir. 6 2001)).

7 1. Standing and Antitrust Injury

Defendants argue that Orion has not suffered an injury-in-fact nor an antitrust injury 8 because there was no possibility that Orion would have acquired Meade regardless of any alleged 9

misconduct by Defendants. In February 2013, Orion sent Meade a letter indicating its interest in 10 acquiring Meade for $4.5 million. Caseria Ex. 27 at 1. Meade chose to proceed with a different 11 offer from JOC. Eckert Ex. 1; see Caseria Ex. 28 (“Meade Europe” was a subsidiary of JOC at the 12 time). In April, JOC attempted to reduce its offer from $5 million to $4 million, prompting Meade 13 to re-open the bidding process. Eckert Ex. 3 at 1. In early May, Meade reached out to Orion and 14 explained that it was “no longer under an agreement to deal with another party [i.e., JOC] 15 exclusively.” Eckert Ex. 4. Orion declined to provide another offer. Eckert Ex. 5 at 1. JOC 16 subsequently offered $4.5 million, which Meade accepted, and the proposed merger was 17 announced on May 17, 2013. Caseria Ex. 28 at 1. In June, Sunny made an unsolicited bid of $5.5 18 million. FAC Ex. 1 at B-2. Meade then terminated the proposed merger with JOC and accepted 19 Sunny’s offer on July 16, 2013. Id.

20 This timeline shows that Orion would not have acquired Meade in the absence of 21

Defendants’ alleged conduct; JOC would have. JOC and Meade had announced their merger—for 22 the amount that Orion had already offered—when Defendants swooped in. Orion points to the 23

testimony of its CEO, Peter Moreo, that Meade had contacted Orion to say that “JOC attempted to 24 retrade or lower the price” and to ask if Orion would like to rebid. Hagey Ex. 10 at 252:22- 25 253:11. However, this testimony does not create a factual dispute. Peter Moreo admits that he 26 does not remember when this outreach occurred. Id. at 252:15-16 (“I don’t remember the exact 27 Case No.: 5:16-cv-06370-EJD 1 dates.”); 252:24 (“I don’t remember one hundred percent.”); see City of Vernon v. S. California 2 Edison Co., 955 F.2d 1361, 1370 (9th Cir. 1992) (“[T]he fact that Mr. Greenwalt could not recall 3 any names, dates or times further indicates that Vernon has not raised a factual dispute sufficient 4 to survive summary judgment.”). And his testimony is entirely consistent with the timeline 5 supported by Defendants’ evidence. JOC did indeed attempt to lower its price, but that was before 6 JOC and Meade ultimately agreed to and announced their merger. The timeline of Meade’s 7 negotiations indicates that Orion was not in a position to acquire Meade, regardless of Defendants’ alleged misconduct.

8 Orion makes another argument that absent the alleged unlawful conduct, it would have had 9

an additional $11.4 to $30.6 million to invest in purchasing Meade. But those figures arise from 10 damages estimated by its damages expert, Dr. Zona, and are based on the period from November 11 2013 to May 2018. Zona Rep. ¶ 105; id. ¶¶ 103-118, 132. Dr. Zona’s report does not indicate that 12 Orion could have had more money to spend on Meade in the first half of 2013. 13 The court finds that there is no genuine dispute that Defendants did not cause Orion’s 14 failure to acquire Meade. See Fed. R. Civ. P. 56(g); see also Los Angeles Mem’l Coliseum 15 Comm’n v. Nat’l Football League, 791 F.2d 1356, 1366 (9th Cir. 1986) (“Recovery will not be 16 permitted for injuries which have been independently caused by something other than the antitrust 17 violation.”). Accordingly, Orion lacks standing to maintain claims and recover damages arising 18 from its failure to acquire Meade for itself. 19 However, Orion’s motion does not state that its failure to acquire Meade is the only harm 20 caused by the alleged conspiracy. Rather, Orion claims that the conspiracy to enact the merger 21 harmed it by increasing market concentration. Pl.’s Mot. at 11; Pl.’s Reply at n.5. Here, Orion’s 22 motion relies on Dr. Zona’s calculation of the Herfindahl–Hirschman Index (“HHI”) for the 23 proposed relevant market. Pl.’s Mot at 11, 17-21. Dr. Zona defines the relevant market as “the 24 market for telescope manufacturing services.” Zona Rep. ¶ 45. HHI is a measure of industry 25 concentration that has been widely accepted by courts considering antitrust merger and acquisition 26 actions. Id. ¶ 56; see, e.g., St. Alphonsus Med. Ctr.-Nampa Inc. v. St. Luke’s Health Sys., Ltd., 778 27 Case No.: 5:16-cv-06370-EJD 1 F.3d 775, 788 (9th Cir. 2015); F.T.C. v. H.J. Heinz Co., 246 F.3d 708, 716 (D.C. Cir. 2001). A 2 market with an HHI of 2,500 or above is “highly concentrated” by the standards of the federal 3 government. Zona Rep. ¶ 56 (citing U.S. Department of Justice & FTC, Horizontal Merger 4 Guidelines § 5.3 (2010)). “[A] merger that increases HHI by more than 200 points, to a total 5 number exceeding 2500, is presumptively anticompetitive.” ProMedica Health Sys., Inc. v. 6 F.T.C., 749 F.3d 559, 568 (6th Cir. 2014) (citations omitted); see also St. Alphonsus, 778 F.3d at 7 786 (“Mergers that increase the HHI more than 200 points and result in highly concentrated markets are presumed to be likely to enhance market power.”). An antitrust injury can arise from 8 a merger or acquisition that results in “either . . . a lessening of competition due to the acquisitions 9 or from ‘anticompetitive acts made possible’ by the acquisitions.” McCaw Pers. Commc’ns, Inc. 10 v. Pac. Telesis Grp., 645 F. Supp. 1166, 1170 (N.D. Cal. 1986) (citing Arthur S. Langenderfer, 11 Inc. v. S.E. Johnson Co., 729 F.2d 1050, 1058-59 (6th Cir. 1984), cert. denied, 469 U.S. 1036 12 (1984)). Here, Dr. Zona calculated that, prior to the Meade acquisition in 2012, the HHI for the 13 proposed market was 3,284.80—already a highly concentrated market. Zone Rep. Tbl. 1 (Dkt. 14 No. 309-1)3 at p. 5. The year of the acquisition, the HHI rose to 4,375.69. This jump of 1,094.89 15 in the HHI is more than five times the amount presumed to enhance market power, St. Alphonsus, 16 778 F.3d at 786, and is comparable to the increase of 1,078 to a total market number of 4,391 in 17 ProMedica Health, 749 F.3d at 568, where the Sixth Circuit upheld the FTC’s ordered divestiture 18 of merged entities. Id. at 573.

19 Defendants do not contest this theory directly, but in their arguments concerning Orion’s 20 claim under Section 7 of the Clayton Act, they argue that calculating HHI requires a properly 21 defined market, and that Orion’s proposed market is inadequate. They argue that Dr. Zona 22 conducted insufficient analysis to determine this market, and instead relied on conclusory 23 assertions to the point that this court should grant summary judgment in their favor. The Supreme 24 25

26 3 Despite both parties referring to this table in their supporting papers, it appears Orion mistakenly failed to file it with the motion. At the court’s request, Orion filed the table at a later date. 27 Case No.: 5:16-cv-06370-EJD 1 Court has instructed that “[t]he outer boundaries of a product market are [to be] determined by the 2 reasonable interchangeability of use or the cross-elasticity of demand between the product itself 3 and substitutes for it.” Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962). While, 4 “[s]ummary judgment in an antitrust case is appropriate where the plaintiff fails to define a 5 cognizable market,” AFMS LLC v. United Parcel Serv., Inc., 696 F. App’x 293, 294 (9th Cir. 6 2017), cert. denied, 138 S. Ct. 1180 (2018), “[t]he definition of the relevant market – both product 7 and geographic – is generally a question of fact reserved for the jury.” Sidibe v. Sutter Health, 2019 WL 2078788, at[*25] (N.D. Cal. May 9, 2019) (citation and quotations omitted); see also St. 8 Alphonsus, 778 F.3d at 783 (“Definition of the relevant market is a factual question . . . .”). 9 Here, the court disagrees with Defendants. Dr. Zona’s report thoroughly analyzes the 10 relevant market. For example, he notes that telescopes are a specialized product with a very 11 limited number of manufacturers worldwide, he examines U.S. Customs data to calculate market 12 share and establish market power using the HHI index, he analyzes the effect that technical 13 industrial capabilities have on manufacturers to produce at scale, and he identifies barriers to entry 14 and expansion by potential competitors. Zona Rep. ¶¶ 43-59, 65-71. Dr. Sasian, Orion’s technical 15 telescope expert, boosts Dr. Zona’s proposed market by opining that telescope manufacturers can 16 use “similar equipment . . . to manufacture both low- and high-end products. The distinctions 17 between making low- and midrange telescopes are even less significant.” Sasian Rep. ¶ 5. 18 The court finds that whether Orion’s proposed market is properly defined is a question for 19 the jury. Accordingly, whether Orion has suffered an antitrust injury on this theory of liability is 20 not a question to be resolved on summary judgment. 21 2. Conspiracy 22 Having established that Orion has shown sufficient antitrust injury to withstand summary 23 judgment, the court turns to whether summary judgment is appropriate as to whether Defendants 24 and the Synta Entities unlawfully conspired to carry out the acquisition. Orion has presented 25 evidence that Sunny and the Synta Entities worked together to engineer the Meade acquisition. 26 For example, Sunny informed several officers of the Synta Entities of its intention to purchase 27 Case No.: 5:16-cv-06370-EJD 1 Meade weeks before submitting its bid. See generally FAC Ex. 1 at A, B-2. Around this time 2 Peter Ni sent Daivd Shen and the President of Celestron Dave Anderson an email stating, “I 3 discussed with you about the case of purchasing meade in USA. To prevent JOC to buy MEADE, 4 we decided to purchase MEADE by sunny after discussion. But the premise of this case is 5 CELESTRON/SYNTA should be provid[ing] the financial support to SUNNY.” Borden Ex. 14. 6 Sunny’s engagement letter with its legal counsel for the acquisition—attorneys from the same firm 7 providing counsel to Defendants in this case—states that Sunny “ha[s] instructed [the attorneys] to take direction from and communicate directly with your advisors, Dave Anderson, Laurence 8 Huen, David Shen and Joe Lupica [then CEO of Celestron who became CEO of Meade after 9 Sunny’s acquisition].” Borden Ex. 16. Defendants offer explanations for this evidence that, they 10 contend, absolve them of any wrongdoing. 11 The evidence here is subject to multiple interpretations, so summary judgment is not 12 appropriate as to the conspiracy claims. The court grants partial summary judgment in favor of 13 Defendants, finding that Defendants did not stop Orion from acquiring Meade. Orion may not 14 recover damages based on the Meade acquisition. However, the court denies both parties’ motions 15 for summary judgment on the theory that the alleged conspiracy to acquire Meade harmed Orion 16 through concentrating the market.

17 B. Section 7 of the Clayton Act 18

Defendants and Orion both move for summary judgment on Orion’s claim based on 19

Section 7 of the Clayton Act. Section 7 of the Clayton Act “bars mergers whose effect ‘may be 20 substantially to lessen competition, or to tend to create a monopoly.’” St. Alphonsus, 778 F.3d at 21 783 (quoting 15 U.S.C. § 18). Claims brought under Section 7 voyage across a multi-step burden- 22 shifting analysis. Id. First, the plaintiff must establish a prima facie case that the merger is 23 anticompetitive. Id. To do so, the plaintiff must “(1) propose the proper relevant market and (2) 24 show that the effect of the merger in that market is likely to be anticompetitive.” Fed. Trade 25 Comm’n v. Penn State Hershey Med. Ctr., 838 F.3d 327, 337-38 (3d Cir. 2016). “Determination 26 of the relevant product and geographic markets is a necessary predicate to deciding whether a 27 Case No.: 5:16-cv-06370-EJD 1 merger contravenes the Clayton Act.” St. Alphonsus, 778 F.3d at 783 (quoting United States v. 2 Marine Bancorporation, Inc., 418 U.S. 602, 618 (1974)). Then the burden shifts to the defendant 3 to rebut the prima facie case. St. Alphonsus, 778 F.3d at 783. “If the defendant successfully 4 rebuts the prima facie case, the burden of production shifts back to the [plaintiff] and merges with 5 the ultimate burden of persuasion, which is incumbent on the [plaintiff] at all times.” Id. (citation, 6 quotations, and alterations omitted). 7 While Orion analyzes the entire burden-shifting framework, Defendants primarily attack Orion’s definition of the proper market. Defendants also move for summary judgment on Orion’s 8 Section 2 claims based on this same argument. The court has already addressed the parties’ 9 arguments on the market and found the issue to be one for the jury. Defendants briefly make one 10 other argument that Orion’s theory of harm under the Clayton Act is inconsistent with the court’s 11 order denying Defendants’ motion to dismiss (Dkt. No. 230 at 7). Defendants’ mischaracterize the 12 court’s order. The court did not hold that Orion was limited to seeking damages arising from 13 having to pay supracompetitive prices. Rather, the court found that the FAC adequately pled that 14 the Meade “acquisition allowed Defendants to increase their market share, to stifle competition, 15 and to attain monopoly power. Orion alleges that it has been injured by these harms to 16 competition among telescope manufacturers.” Dkt. No. 230 at 7. This argument does not warrant 17 summary judgment.

18 Because the court has found that a triable issue exists as to the relevant market, the court 19 denies both motions for summary judgment on the Clayton Act claim, and Defendants’ motion to 20 the extent it sought summary judgment on Orion’s Section 2 claims based on market definition. 21

C. Market Allocation

22 Orion claims that the Synta Entities and Defendants conspired to allocate the telescope 23 market. The pillars of this argument are Orion’s contentions (1) that the Synta Entities and 24

Defendants have the capacity to manufacture the same telescopes, (2) that they have never 25

competed for Orion’s business, and (3) that they cooperate in other facets of their business. Orion 26 largely relies on its telescope expert Dr. Sasian to support the first pillar. He opines that both 27 Case No.: 5:16-cv-06370-EJD 1 Sunny and the Synta Entities have sufficient technical expertise, manufacturing capabilities, and 2 intellectual property to manufacture the same or similar telescopes. Sasian Rep. § II. Orion 3 presents various evidence in support of the second pillar. For example, Sunny’s 30(b)(6) witness 4 testified that Sunny only once offered a price quote to Orion for a product that Suzhou Synta also 5 manufactured. Borden Ex. 2 at 53:4-14. Orion refers to a December 12, 2013 email wherein 6 David Shen wrote that Peter “Ni will not be a competitor and is trustworthy when it comes to 7 business” and that if Defendants “[b]id[] with Costco between May and June (compete with Celestron for the price) . . . celestron would not trust sunny any longer.” Borden Ex. 57 (internal 8 Ex. 13-14 at 1, 3). And, finally, Orion argue that the Meade acquisition demonstrates market 9 allocation because Defendants and the Synta Entities worked together to prevent JOC from 10 expanding its reach. Defendants counter by presenting their own evidence and offering their own 11 interpretations of Orion’s evidence. They argue, for example, that Sunny’s factory in China 12 lacked the capabilities to manufacture the high-end telescopes manufactured by Suzhou Synta. 13 Caseria Ex. 14 at 44:6-11. And Defendants contend that with the Meade acquisition, they began 14 manufacturing high-end telescopes. See Caseria Ex. 34. 15 The competing evidence and its different interpretations show that the question of market 16 allocation is not appropriate for resolution at summary judgment. Both parties’ motions are 17 denied.

18 D. Price Fixing 19

Orion’s next theory of liability under Section 1 is that Defendants and the Synta entities 20

conspired to fix market prices. “Foremost in the category of per se violations is horizontal price- 21 fixing among competitors.” Knevelbaard Dairies v. Kraft Foods, Inc., 232 F.3d 979, 986 (9th Cir. 22 2000). Orion contends that Defendants fixed prices in two separate ways. First, Orion contends 23 that Defendants and the Synta Entities engaged in price fixing through an arrangement where 24 Sunny sold its telescopes to Orion through Joyce Huang, an employee of the Synta Entities. The 25 arrangement necessarily required Sunny to provide sensitive pricing information and its trade- 26 secret order statistics to the Synta Entities. Second, Orion argues that Defendants and the Synta 27 Case No.: 5:16-cv-06370-EJD 1 Entities used their market power to fix prices and credit terms to prevent Orion from acquiring the 2 Hayneedle Assets.

3 1. Sunny’s Sales to Orion 4 When competitors share sensitive information, such as pricing information, it can support a 5 finding that the competitors are part of a conspiracy. In re Static Random Access Memory (SRAM) 6 Antitrust Litig., 580 F. Supp. 2d 896, 902 (N.D. Cal. 2008) (citing United States v. Container 7 Corp. of Am., 393 U.S. 333, 335 (1969)). Orion argues that it is entitled to summary judgment because Defendants and the Synta Entities engaged in price fixing by exchanging sensitive pricing 8 information and trade-secret sales information, and because the Synta Entities sold Sunny’s 9 products on Sunny’s behalf. Huang’s business card indicates that her employer is “Synta 10 Technology Corporation” and her email address is [email protected]. Borden Ex. 86. Huang 11 took Orion’s orders of Sunny’s telescopes and quoted the prices of Sunny’s telescopes to Orion. 12 Pl.’s Sep. Stmt. Facts 43, 44. On at least one occasion, Sunny also provided Celestron with data 13 concerning its historic sales to Orion. Pl.’s Sep. Stmt. Fact 46. Sunny considered this sort of sales 14 data to be a trade secret. Id.

15 Defendants counter that Synta Tech is merely a subsidiary distributor for Suzhou Synta 16 and is not a competitor of Sunny. Defendants raise two arguments from here: First, the 17 arrangement is an ordinary one that does not implicate antitrust laws. And second, Orion is an 18 indirect purchaser of Sunny’s products, so it is barred from bringing a claim against Sunny in 19 place of the direct purchaser, Synta Tech. As to the first argument, the court notes that the 20 preamble of the Settlement Agreement lists Suzhou Synta and Synta Tech as separate entities. 21

Caseria Ex. 40 at 1. Defendants describe this arrangement as a commonplace one by which a 22

manufacturer (Sunny) works with a distributor (Synta Tech) to sell product to a retailer (Orion). 23 Under such an arrangement, Defendants argue, Sunny’s provision of its pricing and sales data to 24 Synta does not raise antitrust concerns. Defendants’ next argument is that Orion, as an indirect 25 purchaser, lacks standing to pursue damages for antitrust violations under Illinois Brick Co. v. 26 Illinois, 431 U.S. 720 (1979). Illinois Brick, though, does not preclude standing for an indirect 27 Case No.: 5:16-cv-06370-EJD 1 purchaser where a price-fixing conspiracy exists between the manufacturer and the direct 2 purchaser. Delaware Valley Surgical Supply Inc. v. Johnson & Johnson, 523 F.3d 1116, 1122-23 3 (9th Cir. 2008).

4 Here, Orion has presented evidence that Synta Tech is one of several shell companies run 5 by David Shen and is, thusly, part of the alleged conspiracy. For example, during Sunny’s 6 corporate deposition, the 30(b)(6) witness was asked, “Do you know what Synta Technology 7 Corporation is?” to which the witness replied, “I don’t.” Hagey Ex. 6 at 35:15-21. Orion also contends that the Settlement Agreement indicates that David Shen controls Synta Tech. Caseria 8 Ex. 40 at 12. This evidence shows that there are triable issues as to which Synta Entity distributed 9 Sunny’s telescopes to Orion and whether that entity was part of the alleged conspiracy. Both 10 parties’ motions are denied as to this theory of liability. 11 2. The Hayneedle Assets 12 Orion claims that Defendants and the Synta Entities engaged in unlawful price fixing by 13 cutting off its credit when they learned that Orion sought to purchase the Hayneedle Assets. 14 Defendants counter that the deal failed to close for other reasons, so Orion cannot show causation. 15 The Hayneedle Assets are a set of web domains, including telescopes.com. Pl.’s Sep. Stmt Fact 16 47. On May 12, 2014, Orion sent a letter of intent to Hayneedle indicating that Orion sought to 17 purchase the Assets. Borden Ex. 73. On June 14, 2014, the Synta Entities sent Peter Moreo an 18 email that cut off Orion’s credit, and stated, “if Orion really buys Hayneedle, this will be the 19 beginning of hazard, we could not trust Orion’s credit any more.” Borden Ex. 74 at 2. The Synta 20 Entities then forwarded their email to Sunny and asked Sunny to also withdraw Orion’s line of 21 credit. Id. Sunny then sent Orion a nearly identical email. Borden Ex. 75. Orion contends that 22 with its supplier credit cut off, it could not move forward with the asset acquisition. Borden Ex. 7 23 at 187:11-17.

24 However, Defendants present evidence that the acquisition foundered because of Orion’s 25 demand that Hayneedle also enter into a non-compete agreement. In a company-wide email 26 recounting the events, Peter Moreo wrote, “After weeks of moving forward by both companies, 27

Case No.: 5:16-cv-06370-EJD 1 we found a major point of disagreement . . . . [W]e insisted on legal protections in the contract re 2 non-compete provisions that the Seller found unacceptable.” Caseria Ex. 35. Peter Moreo 3 explained in deposition that he chose to withhold information about the Synta Entities and Sunny 4 cutting off Orion’s credit in his company-wide email because employees may find such 5 information “disconcerting.” Hagey Ex. 10 at 216:3-13. He also testified that the non-compete 6 issue was only one of three reasons the deal collapsed. Borden Ex. 7 at 187:3-188:10. The other 7 two reasons involved Defendants and the Synta Entities attempting to sabotage the deal. Id.

Defendants argue, as they did with the Meade acquisition, that they did not cause Orion’s 8

alleged injury. Therefore, Orion lacks injury-in-fact and antitrust injury for this theory of price 9 fixing, and the court should grant summary judgment in its favor. See Los Angeles Mem’l 10 Coliseum, 791 F.2d at 1366; see also Online DVD-Rental, 779 F.3d at 922. Orion counters that it 11 is not required to show that Defendants’ conduct was the only cause, but only that it was a 12 substantial factor in bringing about the injury. See Los Angeles Mem’l Coliseum, 791 F.2d at 1366 13 (“[A] plaintiff need not prove that the antitrust violation was the only cause of its injury . . . ; proof 14 that the violation was a material cause is sufficient.”); Catlin v. Washington Energy Co., 791 F.2d 15 1343, 1347 (9th Cir. 1986) (A plaintiff “need not rule out all possible alternative sources of injury, 16 they must show that the alleged anticompetitive activity was a material cause of the injury.” 17 (citation and quotations omitted)).

18 Faced with competing interpretations of the evidence, the court finds there is a genuine 19

dispute as to whether the alleged conduct of defendants was a material cause of Orion’s injury. 20 Both motions are denied as to the Hayneedle Assets. 21 E. Below-Cost Pricing 22 A claim for below-cost pricing must show two things: (1) “the prices complained of are 23 below an appropriate measure of its rival’s costs,” and (2) “the competitor had a dangerous 24 probability of recouping its investment in below-cost prices.” Vollrath Co. v. Sammi Corp., 9 F.3d 25 1455, 1460 (9th Cir. 1993) (citation, quotations, and alterations omitted). Such claims are “rarely 26 tried, and even more rarely successful.” Id. (quoting Matsushita, 475 U.S. at 589). Orion does not 27 Case No.: 5:16-cv-06370-EJD 1 contest that its claims arising from below-cost pricing are based on conduct by the Synta Entities, 2 and by not Defendants. Pl.’s Reply at 15. But they contend that, because Defendants allegedly 3 have entered into an unlawful conspiracy with the Synta Entities, they are jointly and severally 4 liable for damages caused by the Synta Entities. Id. The court need not consider the merits of this 5 legal argument because Orion does not present any evidence that the Synta Entities’ prices are 6 below their costs. Defendants’ motion is granted as to Orion’s claims based on below-cost 7 pricing.

F. Refusal to Deal

8 Defendants move for summary judgment on Orion’s claims based on Defendants’ alleged 9

refusal to deal with Orion. After Orion and the Synta Entities executed the Settlement Agreement 10 in September 2016, Orion raised the possibility of obtaining telescopes from Sunny directly. 11 Caseria Ex. 42 at 3-4. Sunny though refused to supply Orion until Defendants and Orion “solved 12 the unfriendly disputes,” i.e. the negotiations that preceded this litigation. Id. at 3; Defs.’ Sep. 13 Stmt. Fact 17. Orion contends that under Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 14 U.S. 585, 605 (1985), Defendants’ refusal to deal with Orion was anticompetitive because they 15 had no rational economic reason to cease making money from Orion. The Supreme Court has 16 clarified that Aspen Skiing is “is at or near the outer boundary” of Sherman Act liability. Verizon 17 Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 409 (2004). It is a narrow 18 exception to the general rule that “an entirely private business [may] freely . . . exercise his own 19 independent discretion as to parties with whom he will deal.” Id. at 408 (citation and quotations 20 omitted). The Ninth Circuit has recognized that a company may refuse to deal with an entity that 21 sues the company without contravening antitrust laws. Zoslaw v. MCA Distrib. Corp., 693 F.2d 22 870, 890 (9th Cir. 1982). “[T]he bringing of a lawsuit by the customer may provide a sound 23 business reason for the manufacturer to terminate their relation.” Id. (quoting House of Materials, 24 Inc. v. Simplicity Pattern Co., 298 F.2d 867, 871 (2d Cir.1962)). 25 Here, it is undisputed that Defendants only refused to deal with Orion after Orion began 26 threatening litigation. Caseria Ex. 42 at 2 (“we received the letter with a huge claim from your 27 Case No.: 5:16-cv-06370-EJD 1 lawyer . . . I hope we can cooperate with each other directly after this issue is settled.”). Orion 2 argues that because it had, at least some, direct dealings with Sunny prior to Defendants’ refusal, 3 Aspen Skiing controls and Defendants are liable. The court disagrees. Aspen Skiing did not 4 involve circumstances, such as these, where the purchaser was threatening litigation against the 5 manufacturer. Rather, this case is more similar to Zoslaw, where the Ninth Circuit upheld 6 summary judgment in favor of the defendant-supplier who had “ceased selling merchandise” to 7 the plaintiff-retailer after they settled their initial lawsuit. 693 F.2d at 875, 890. Given the narrow scope of Aspen Skiing, the court finds that Defendants were justified in their decision to 8 discontinue their business relationship with Orion. Defendants’ motion for summary judgment is 9 granted.

10 G. Restitution Under the UCL 11

Defendant makes two arguments as to Orion’s claim under the UCL. First, they seek 12 summary judgment precluding Orion from recovering any non-restitutionary award on its UCL 13

claim. “A UCL action is equitable in nature; damages cannot be recovered.” Korea Supply Co. v. 14 Lockheed Martin Corp., 29 Cal. 4th 1134, 1144 (2003). An order for restitution is one 15 “compelling a UCL defendant to return money obtained through an unfair business practice to 16 those persons in interest from whom the property was taken, that is, to persons who had an 17 ownership interest in the property or those claiming through that person.” Id. at 1144-45; see also 18 SkinMedica, Inc. v. Histogen Inc., 869 F. Supp. 2d 1176, 1184 (S.D. Cal. 2012) (“In order to 19 constitute restitution, the victim must have at least an identifiable vested interest in the money he 20 seeks to recover. The interest may not be contingent upon an uncertain future event.” (citation 21 omitted)). In a UCL claim, “disgorgement of profits is allowed . . . only to the extent it constitutes 22 restitution, i.e., profits unfairly obtained to the extent they represent money in which the plaintiff 23 has an ownership interest.” In re Ditropan XL Antitrust Litig., 529 F. Supp. 2d 1098, 1102 (N.D. 24 Cal. 2007).

25 Defendants argue that Orion’s sought-after damages arising from lost profits from price 26

overcharges, economic injury, or last value (see, e.g., Zona Rep. ¶¶ 8(c), 8(d), 124) do not qualify 27 Case No.: 5:16-cv-06370-EJD 1 as restitution. Orion agrees that the UCL only allows for restitution, and then argues it is entitled 2 for restitution for Defendants’ overcharges. Orion contends that it is entitled to “the difference in 3 value between what it paid due to Defendants’ unlawful activities and what it actually received.” 4 Pl.’s Reply at 15. The court agrees with Orion. To the extent that Orion can show that 5 Defendants overcharged them for specific goods or services, Orion is entitled to recover the 6 difference between the overcharge that Orion actually paid and what Orion would have paid 7 absent Defendants’ allegedly unlawful conduct. Orion is not entitled to other monetary awards on its UCL claim. In re Ditropan XL Antitrust Litig., 529 F. Supp. 2d at 1105 (holding that antitrust 8 plaintiffs could recover for overcharges, as restitution, under the UCL). In their reply, Defendants 9 argue, for the first time, that Orion has not presented sufficient evidence to what this amount 10 would be. Defs.’ Reply at 15. The court will not consider this argument because it was not raised 11 in Defendants’ motion.

12 Defendants also argue that Orion cannot take restitution from Defendants because Orion 13

has not dealt directly with Defendants to obtain Defendants’ products. In other words, Orion is 14 not entitled to restitution because it is an indirect purchaser. This argument has no merit. “In light 15 of the reasoning of Korea Supply . . . the Court concludes that as long as Indirect Purchaser 16 Plaintiffs are ultimately able to prove traceability, California law authorizes this Court to award 17 them restitution under the UCL.” In re Ditropan XL Antitrust Litig., 529 F. Supp. 2d at 1105. 18 Defendants’ summary judgment motion is denied as to Orion’s UCL claims. 19 H. Orion’s State Law Claims 20 Orion’s state law claims arise from the Cartwright Act and the UCL. For this motion, 21 these claims rise and fall with Orion’s federal claims. Cty. of Tuolumne v. Sonora Cmty. Hosp., 22 236 F.3d 1148, 1160 (9th Cir. 2001) (“The analysis under California’s antitrust law mirrors the 23 analysis under federal law because the Cartwright Act was modeled after the Sherman Act” 24 (citation omitted)); Stevens v. Sup. Ct., 75 Cal.App.4th 594, 602 (1999) (“The UCL works by 25 borrowing violations of other laws and treating those transgressions, when committed as a 26 business activity, as unlawful business practices.”) (citation, quotations, and alterations omitted). 27 Case No.: 5:16-cv-06370-EJD 1 Because the court has denied Orion’s motion as to its federal claims, it also denies its motion for 2 its state law claims.

3 I. Defendant Meade 4 Defendants ask the court to grant summary judgment as to all claims against Meade 5 || because, they argue, no evidence implicates Meade in any unlawful activity. The court interprets 6 || the evidence differently. Various documents raise a triable question as to whether Meade was 7 || engaged in the alleged conspiracy. See, e.g., Borden Ex. 79 (November 12, 2013 internal Meade g email stating “Mr. Ni discussed with me earlier that . . . he doesn’t want to disrupt Synta 9 business.”). Defendants argue that, in context, these documents are unremarkable, and that may be true. But that is not a question for this court to decide. Defendants motion for summar 10 q judgment as to Defendant Meade is denied.

IV. Conclusion

For the reasons discussed above, the court denies Orion’s motion. The court grants

3 14 Defendants’ motion as to Orion’s claims based on below-market pricing and refusal to deal. The S 15 court also grants Defendants’ motion so far as the court finds that Defendants did not prevent

6 Orion from acquiring Meade for itself; Orion may not recover damages based on its inability to acquire Meade. Defendants’ motion is otherwise denied. 17

IT ISSO ORDERED.

Z 18

Dated: September 20, 2019 19 20 EDWARD J. DAVILA

United States District Judge 22 23 24 25 26 27

Case No.: 5:16-cv-06370-EJD 283 |} ORDER DENYING MOTION FOR SUMMARY JUDGMENT; GRANTING IN PART AND DENYING IN PART CROSS-MOTION FOR SUMMARY JUDGMENT