ABC Distributing, Inc. v. Living Essentials LLC, 5:15-cv-02064

Background

Plaintiffs ABC Distributing, Elite Wholesale, and Ace Wholesale (small California wholesalers) purchased 5‑hour Energy through broker Paramount; Defendants Living Essentials and parent Innovation Ventures manufacture and distribute 5‑hour Energy.
Plaintiffs allege Living Essentials sold 5‑hour Energy to Costco Business Centers (CBCs) at lower net prices and with promotional benefits (instant rebates, fence/endcap advertising) that Plaintiffs did not receive.
Pricing configurations differed by purchaser (club packs for Costco; master cases/display racks for wholesalers) and various discounts/rebates/advertising payments were disputed as to whether they affect net price or are payments for services.
Plaintiffs moved for partial summary judgment on RPA and related state claims (except damages); Defendants moved for summary judgment on all claims.
Key factual disputes: whether Plaintiffs actually competed with Costco for the same retail customers (threshold for RPA §2(a) Morton Salt inference), whether contested rebates and promotions should count as net price (§2(a)) or as promotional services (§2(d)), and whether price differences were significant.
Court denied both sides’ summary judgment motions because genuine disputes of material fact exist on actual competition, the nature/valuation of discounts/promotional payments, and the significance of any price differential.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Plaintiffs and Costco actually competed (threshold for RPA §2(a) competitive injury)	Competition exists because Plaintiffs and Costco operate in the same supply chain and Costco offered delivery into zip codes containing Plaintiffs’ customers; contemporaneous company emails/employee statements show competitive impact	Plaintiffs and Costco differ in business model, product packages, services (delivery, credit), and customer targets; geographic overlap alone does not prove actual competition	Disputed — court found genuine factual dispute whether they actually competed; summary judgment for Plaintiffs denied on §2(a)
Whether a Morton Salt inference applies (significant price reduction over substantial time)	Rebates and promotional payments must be included in Costco’s net price, showing a meaningful advantage over Plaintiffs across the limitations period	Many contested discounts (advertising, national promotions, instant rebates) are functional or service payments and, when properly accounted for, reduce the measured price differential to de minimis	Disputed — factual disputes over which discounts count and their value preclude summary judgment for either side
Whether promotional/advertising payments and rebates give rise to §2(d) liability (available to all on proportionally equal terms)	Advertising payments (fence/endcap, endcap) and some rebates were benefits tied to resale promotion and were not offered to Plaintiffs on equal terms	Some payments are legitimate payments for promotional services unique to Costco’s role; rebates here are not tied to a service and thus are part of net price under §2(a), not §2(d)	Disputed — court held rebates count toward net price under §2(a); whether advertising payments exceed promotional value (thus actionable under §2(a)) or must be analyzed under §2(d) and whether they were available on proportionate terms is a factual question for trial
Evidentiary challenges (experts and interrogatory responses)	Plaintiffs moved to exclude Defendants’ expert Woroch and sought to exclude certain undisclosed evidence	Defendants moved to exclude Plaintiffs’ expert McDuff and defended interrogatory responses as non‑prejudicial	Court denied Daubert challenges to both experts; granted Plaintiffs’ motion in part (limited exclusion regarding claims about lower list prices and specific undisclosed rebate/2‑for‑$5 evidence); resolved discovery disputes but left substantive factual issues for trial

Key Cases Cited

Volvo Trucks N. Am., Inc. v. Reeder‑Simco GMG, Inc., 546 U.S. 164 (clarifies that a Morton Salt inference requires evidence that the favored and disfavored purchasers actually competed for the same customer)
Fred Meyer, Inc. v. F.T.C., 359 F.2d 351 (9th Cir. 1966) (rebates and discounts that effectively lower net price are cognizable under RPA §2(a))
FTC v. Sun Oil Co., 371 U.S. 505 (discusses diverted sales as direct evidence of competitive injury)
Falls City Indus. v. Vanco Beverage, Inc., 460 U.S. 428 (recognizes direct proof of diverted sales can establish competitive injury under RPA §2(a))
Hasbrouck v. Texaco, Inc., 842 F.2d 1034 (9th Cir. 1987) (distinguishes standards for injunctive relief versus damages under RPA; requires antitrust injury for damages)