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Insulate SB, Inc. v. Advanced Finishing Sys.

United States Court of Appeals for the Eighth Circuit

May 12, 2015, Submitted; August 13, 2015, Filed

No. 14-2561

Opinion

 [*540]  RILEY, Chief Judge.

Insulate SB, Inc., a purchaser of fast-set spray foam equipment (FSE), filed this antitrust class action alleging FSE manufacturer Graco Inc. and its subsidiary Graco Minnesota Inc. (Graco) and a number of FSE distributors (Distributors) (collectively, appellees) conspired to restrain trade in violation of federal antitrust law, see 15 U.S.C. § 1, et seq., and numerous state antitrust and consumer protection laws. Insulate claims these conspiracies kept Graco's competitors out of the market, allowing Graco and the Distributors to charge artificially high prices. The district [**3]  [*541]  court1 dismissed the action on the pleadings, and with appellate jurisdiction under 28 U.S.C. § 1291, we affirm.

I. BACKGROUND2

Graco manufactures FSE and sells it to distributors, who then resell on the open market to consumers like Insulate. Because there is no direct market for FSE, distributors are key to its sale. Insulate purchased FSE from defendant distributor Intech Equipment & Supply, L.L.C. and claims Graco's anticompetitive practices forced it to pay an artificially high price. In 2005, Graco purchased a competing FSE manufacturer, Gusmer Corp., thus achieving a 65% share of the North American FSE market, and in 2008, Graco purchased competitor GlasCraft, Inc., raising its market share "to above 90%."

Insulate alleges at some point "Graco agreed with its Distributors individually and collectively to enter into exclusive dealing arrangements for the purpose of keeping new and potential entrants out of the FSE market." Insulate further alleges "key Distributors" assisted Graco in advancing [**4]  its anticompetitive scheme. In October 2007, Graco sent a letter to its distributors citing the "best efforts" clause in its distributor agreements and expressing its preference that distributors refrain from adding non-Graco products. The letter stated:

It is our opinion that taking on an additional competitive product line may significantly reduce the "best efforts" of a Graco distributor to sell our Graco and Gusmer product lines. Graco realizes that a business owner must make independent decisions regarding product lines competitive to Graco and Gusmer product offerings. . . .

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797 F.3d 538 *; 2015 U.S. App. LEXIS 14233 **; 2015-2 Trade Cas. (CCH) P79,262

Insulate SB, Inc., Plaintiff - Appellant v. Advanced Finishing Systems, Inc.; Airtech Spray Systems; Barnhardt Manufacturing Company; C.H. Reed, Inc.; C.J. Spray; Coast Industrial Systems, Inc.; Coatings Holdings, Ltd.; Demilec (USA), LLC; Dove Equipment Co., Inc.; Endisys Fluid Delivery Systems; Golden State Paint Corporation; Graco Inc.; Graco Minnesota Inc.; Jack DeMita, in his individual capacity; Intech Equipment & Supply, LLC; Marco Group International, Inc.; MCC Equipment & Service Center; Specialty Products, Inc.; Spray Foam Nation, (registered under Energy Independence Inc.); Spray Foam Systems, LLC; Spray-Quip, Inc.; Ultimate Linings, Ltd., Defendants - Appellees

Subsequent History: Rehearing denied by, Rehearing, en banc, denied by Insulate Sb v. Advanced Finishing Sys., 2015 U.S. App. LEXIS 17054 (8th Cir. Minn., Sept. 25, 2015)

Prior History:  [**1] Appeal from United States District Court for the District of Minnesota - Minneapolis.

Insulate SB, Inc. v. Advanced Finishing Sys., 2014 U.S. Dist. LEXIS 31188 (D. Minn., Mar. 11, 2014)

CORE TERMS

distributors, antitrust, conspiracy, anti trust law, manufacturer, alleges, antitrust claim, Sherman Act, contracts, discovery, products, unfair, announcement, purchaser, pled, fail to state a claim, unfair competition, concerted action, district court, product line, Cartwright Act, Clayton Act, anticompetitive, competitor

Antitrust & Trade Law, Private Actions, Purchasers, Indirect Purchasers, Civil Procedure, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Standing, Requirements, Appeals, Standards of Review, De Novo Review, Pleadings, Complaints, Requirements for Complaint, Evidence, Judicial Notice, Adjudicative Facts, Public Records, Regulated Practices, General Overview, Discovery & Disclosure, Clayton Act, Claims, Price Fixing & Restraints of Trade, Exclusive & Reciprocal Dealing, Exclusive Dealing, Monopolies & Monopolization, Conspiracy to Monopolize, Elements, Sherman Act, Dismissal, State Regulation, Trade Practices & Unfair Competition, State Regulation, Scope