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Newcal Indus. v. Ikon Office Solution

United States Court of Appeals for the Ninth Circuit

April 19, 2007, Argued and Submitted, San Francisco, California; January 23, 2008, Filed

No. 05-16208



 [***1151]  THOMAS, Circuit Judge:

Five lessors of copier equipment (collectively "Newcal") appeal the dismissal of their complaint for failure to state viable Sherman Act antitrust, Lanham Act, and RICO claims against Defendant IKON. 2  [**2] We reverse.

Newcal and IKON compete to lease name-brand copier equipment to commercial customers. 3 They also compete to provide service contracts for the maintenance of that equipment during the term of the lease. When a lease approaches the end of its term, a new competition begins for the lease of upgrade equipment. Similarly, when a service contract approaches the end of its term, a new competition  [***1152]  begins to buy out the service contract and to provide lease-end services.

Newcal alleges that IKON engaged in an ongoing scheme to defraud IKON customers by amending those customers' lease agreements and service contracts without disclosing that the amendments would lengthen the term of the original agreement. The purpose of extending the contracts was to shield IKON customers from competition in the aftermarkets  [**3] for upgrade equipment and for lease-end services.  [*1044]  That is, by extending the term of the original contract, IKON was able to raise the contract's value, which in turn raised the price to Newcal and other competitors of buying out that contract in the aftermarkets for equipment upgrades and lease-end services.

IKON, it is alleged, obtained lease extensions from its customers without disclosing that the contract amendments the customers signed would result in an extension on the term of the original lease or service agreement. In fact, IKON allegedly deliberately misled its customers to believe that the contract amendments would not affect the original contract's term.

Newcal, which competes with IKON both in the primary market for equipment leases and in the aftermarket for equipment upgrades, brought claims under the Sherman Act, alleging antitrust violations, under the Lanham Act, alleging false advertising, and under RICO, alleging racketeering activity predicated on mail and wire fraud. Newcal also requested a declaration under the Declaratory Judgment Act, 28 U.S.C. § 2201, that IKON's fraudulently procured contracts were invalid.

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513 F.3d 1038 *; 2008 U.S. App. LEXIS 1257 **; 86 U.S.P.Q.2D (BNA) 1150 ***; 2008-1 Trade Cas. (CCH) P76,010

NEWCAL INDUSTRIES, INC., a California Corporation; CPO. LTD., a California Corporation; PINNACLE DOCUMENT SYSTEMS, INC., a California Corporation; KEARNS BUSINESS SOLUTION, INC., a South Carolina Corporation, Plaintiffs-Appellants, v. IKON OFFICE SOLUTION; GENERAL ELECTRIC CORPORATION, a Delaware Corporation, Defendants-Appellees.

Subsequent History: US Supreme Court certiorari denied by IKON Office Solutions, Inc. v. New-Cal Indus., 557 U.S. 903, 129 S. Ct. 2788, 174 L. Ed. 2d 290, 2009 U.S. LEXIS 4427 (June 15, 2009)

Motion denied by, Sanctions disallowed by Newcal Indus. v. Ikon Office Sols., Inc., 2011 U.S. Dist. LEXIS 162077 (N.D. Cal., Apr. 4, 2011)

Motion granted by, in part, Motion denied by, in part, Claim dismissed by, Objection overruled by, As moot Newcal Indus. v. IKON Office Solutions, Inc., 2011 U.S. Dist. LEXIS 54023 (N.D. Cal., May 19, 2011)

Prior History:  [**1] Appeal from the United States District Court for the Northern District of California. D.C. No. CV-04-02776-FMS. Fern M. Smith, District Judge, Presiding.

Newcal Indus. v. IKON Office Solutions, Inc., 2004 U.S. Dist. LEXIS 26229 (N.D. Cal., Dec. 23, 2004)

Disposition: REVERSED and REMANDED.


consumers, aftermarket, district court, market power, contracts, alleges, submarket, contractual, lease, relevant market, customers, antitrust, copier, franchisees, flex, declaratory, factual question, derivative, lease-end, replacement, cognizable, Pizza, contract provision, service contract, monopolization, advertising, monopoly, markets, brand, Lanham Act

Antitrust & Trade Law, Regulated Practices, Market Definition, Relevant Market, Civil Procedure, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Sherman Act, Scope, General Overview, Relevant Market, Product Market Definition, Geographic Market Definition, Evidence, Inferences & Presumptions, Presumptions, Business & Corporate Compliance, Defenses, Inequitable Conduct, Anticompetitive Conduct, Consumer Protection, False Advertising, Lanham Act, Federal Unfair Competition Law, Elements of False Advertising, Puffery, Private Actions, Standing, Justiciability, Injury in Fact, Racketeer Influenced & Corrupt Organizations, Claims, Scope, Judgments, Declaratory Judgments