Western Pacific Kraft, Inc. v. Duro Bag Manufacturing Co.
794 F. Supp. 2d 1087
C.D. Cal.2011Background
- WPK is a California paper bag wholesaler; Duro is its supplier and principal competitor.
- Duro historically authorized debit memos to lower prices for WPK to pass to customers.
- On Oct 9, 2010, Duro ceased authorizing debit memos and raised price to WPK while lowering price to WPK's customers.
- WPK learned of Duro's lower customer prices when customers asked WPK to match them; WPK alleges secret rebates/allowances were used.
- WPK researched AJM Packaging; Duro proactively inquired about WPK's discussions with AJM; no quote obtained from AJM.
- WPK sues under California Bus. & Prof. Code § 17045, alleging secret rebates harmed WPK and destroyed competition.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FAC pleads secret rebates under § 17045 | WPK pleads rebates were undisclosed to WPK and the industry | Rebates were not secret because essential terms were known | FAC plausibly pleads secrecy element |
| Whether WPK was harmed by secret rebates | Rebates caused customers to shift to Duro, harming WPK | Harm attributed to policy change, not rebates | FAC shows harm via customer defections and business loss |
| Whether secret rebates tend to destroy competition | Duro's pricing advantage harms competition among retailers/wholesalers | Harm is speculative or depends on later proof | Rebates have inherent tendency to destroy competition; pleaded adequately |
Key Cases Cited
- Eddins v. Redstone, 134 Cal. App. 4th 290 (Cal. App. 4th Dist. 2005) (secrecy element depends on essential terms known to public)
- Diesel Elec. Sales & Serv., Inc. v. Marco Marine San Diego, Inc., 16 Cal. App. 4th 202 (Cal. App. 4th Dist. 1993) (secret rebates tend to destroy competition when pricing advantage exists)
- Lorenzo v. Qualcomm Inc., 603 F. Supp. 2d 1291 (S.D. Cal. 2009) (context for secrecy of discounts in competitive practices)
- ABC Int'l Traders, Inc. v. Matsushita Elec. Corp., 14 Cal. 4th 1247 (Cal. 1997) (defines competition for § 17045 analysis)
- Resnick v. Hayes, 213 F.3d 443 (9th Cir. 2000) (standard for evaluating pleadings under Rule 12(b)(6) in context)