IQ Dental Supply, Inc. v. Henry Schein, Inc.
924 F.3d 57
2d Cir.2019Background
- IQ Dental Supply (small distributor) sold products via SourceOne’s online portal after prior distributors (DDS and Arnold) were pressured off the platform. Defendants Henry Schein, Patterson, and Benco are large distributors controlling ~80% of the market.
- IQ alleges the Defendants conspired to boycott SourceOne, affiliated State Dental Association (SDA) portals and trade shows, and directly pressured manufacturers not to supply IQ, causing lost sales and profits.
- IQ sued under the Sherman Act and parallel New York and New Jersey antitrust statutes, and asserted state common-law claims (tortious interference, civil conspiracy, aiding and abetting).
- The district court dismissed for lack of antitrust standing (no antitrust injury and not an efficient enforcer) and for failure to state the state-law tort claims. IQ appealed.
- The Second Circuit affirmed dismissal as to IQ’s claims premised on indirect injuries from boycotts of SourceOne and the SDAs, but reversed as to allegations of a direct boycott of IQ, holding IQ has antitrust standing and may proceed on direct-boycott antitrust and related state-law tort claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether IQ pleaded an antitrust injury from the alleged boycotts | IQ: Defendants’ boycott scheme reduced its sales through SourceOne and caused lost profits | Defs: IQ benefitted from DDS/Arnold exit; any SourceOne sales are a windfall, so no antitrust injury | Court: IQ adequately pleaded antitrust injury generally; entitled to proceed on direct-boycott injury allegations but not on injuries derivative of SourceOne/SDA boycotts |
| Whether IQ is an "efficient enforcer" of antitrust claims for indirect (SourceOne/SDA) injuries | IQ: It suffered unique lost profits not recovered by others | Defs: Injuries are indirect/derivative; SourceOne and other plaintiffs are better positioned; damages speculative and duplicative | Court: IQ is not an efficient enforcer for indirect claims; standing denied for those claims |
| Whether IQ is an "efficient enforcer" for direct-boycott allegations (pressure on manufacturers to stop supplying IQ) | IQ: It was a direct target; injuries are concrete, measurable, non-duplicative | Defs: Allegations insufficiently plead joint conduct to boycott IQ | Court: IQ is an efficient enforcer for direct-boycott claims; antitrust standing exists and claims may proceed |
| Sufficiency of state-law tort claims (tortious interference, conspiracy, aiding/abetting) | IQ: Direct boycott supports tort claims; civil claims derive from alleged wrongful conduct | Defs: State tort claims fail absent viable antitrust claim or adequate pleading of wrongdoing | Court: Dismissal affirmed for tort claims tied to indirect allegations; tortious interference and derivative claims survive as to direct-boycott allegations and are remanded |
Key Cases Cited
- Gatt Commc’ns, Inc. v. PMC Assocs., L.L.C., 711 F.3d 68 (2d Cir. 2013) (sets three-step test for antitrust injury and guides standing analysis)
- Associated Gen. Contractors of Cal. v. Cal. State Council of Carpenters, 459 U.S. 519 (1983) (principles on limits of private antitrust standing; "efficient enforcer" concept)
- Brunswick Corp. v. Pueblo Bowl‑O‑Mat, Inc., 429 U.S. 477 (1977) (antitrust injury must be the type the statutes were intended to prevent)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) (competitors cannot recover for benefits conferred by supracompetitive prices)
- Gelboim v. Bank of Am. Corp., 823 F.3d 759 (2d Cir. 2016) (pleading standards and standing review de novo)
- In re DDAVP Direct Purchaser Antitrust Litig., 585 F.3d 677 (2d Cir. 2009) (derivative injuries can be sufficiently direct in certain schemes; efficient-enforcer considerations)
- Paycom Billing Servs., Inc. v. Mastercard Int’l, Inc., 467 F.3d 283 (2d Cir. 2006) (assesses directness and motivation under efficient-enforcer factors)
- Klor’s, Inc. v. Broadway‑Hale Stores, Inc., 359 U.S. 207 (1959) (group boycotts historically unlawful under antitrust law)
- U.S. Football League v. Nat’l Football League, 842 F.2d 1335 (2d Cir. 1988) (damages must be supported by a just and reasonable estimate)
- Monsanto Co. v. Spray‑Rite Serv. Corp., 465 U.S. 752 (1984) (context on legitimate competitive responses and when conduct crosses into wrongful interference)