The opinion of the court was delivered by: Lechner, District Judge.
This is an action brought by the plaintiff, Liggett Group, Inc.
("Liggett"), against defendant, R.J. Reynolds Tobacco Company
("RJR"). On 3 March 2000, Liggett filed a complaint (the
"Complaint") that alleges, inter alia, violations of the
Federal antitrust laws in connection with the distribution and
sale of discount cigarettes. See Complaint. Liggett
specifically alleges RJR violated Section 1 ("Section 1") of the
Sherman Act, 15 U.S.C. § 1, Section 4 ("Section 4") and Section
16 ("Section 16") of the Clayton Act, 15 U.S.C. § 15 and 26.
See id. at ¶¶ 11, 31-39 and pp. 13-14. On 12 April 2000, RJR
filed an answer to the Complaint.
Currently pending is a motion, filed by RJR, to transfer the
action (the "Motion to Transfer") to the United States District
Court for the Middle District of North Carolina (the "Middle
District of North Carolina"), pursuant to 28 U.S.C. § 1404(a)
("Section 1404(a)").*fn1 For the reasons set out below, the
Motion to Transfer is granted; the action is transferred for all
purposes to the Untied States District Court for the Middle
District of North Carolina.
Liggett is a corporation organized and existing under the laws
of the State of Delaware. See id. at ¶ 9. Liggett, is also an
indirect, wholly-owned subsidiary of Brooke Group Holding, Inc.
See id. Liggett maintains substantially all of its
manufacturing facilities in or near Durham, North Carolina. See
id. The premium cigarette brand manufactured by Liggett is Eve®.
See id. The "mass-market" discount cigarette brand manufactured
by Liggett is Pyramid®. See id. In addition, Liggett
manufactures various "private label," "control label" and generic
cigarettes.*fn2 See id.
RJR is a corporation organized and existing under the laws of
the State of New Jersey, with its principal place of business
located in Winston-Salem, North Carolina. See id. at ¶ 10. It
appears RJR transacts business in New Jersey through its sales
office located in Middlesex County. See id. RJR manufactures
cigarettes for sale through retail outlets throughout the United
States under various brand names, including Camel®, Winston®,
Doral® and the Forsyth family brands. See id.
As mentioned, Liggett primarily alleges violations of the
Federal antitrust laws as the basis of the instant action. See
id. at ¶ 1. For example, Liggett alleges RJR illegally
contracted and conspired with cigarette retailers to "restrain
trade by engaging in a pervasive scheme of anticompetitive
conduct." See id. At issue is the "Every Day Low Price" (the
"EDLP") plan promulgated by RJR and the EDLP contracts (the "EDLP
Contracts") utilized by RJR to implement the program. See id.
at ¶ 2. Liggett alleges the purpose and effect of the EDLP plan
"has been to impede the functions of the marketplace by reducing
consumer choice, raising prices paid by consumers, and
foreclosing competition in the manufacture and sale of discount
cigarettes throughout the United States."*fn3 Id.
As stated in the Complaint, it appears cigarettes are sold by
manufacturers to wholesalers who, in turn, sell cigarettes to
retailers throughout the United States. See id. at ¶ 13. In
addition, it appears cigarettes are directly sold by
manufacturers to large retailers located in the United States.
See id. Liggett alleges retailers "typically" do not buy
cigarettes through any other means. See id. at ¶ 15. As a
result, the Complaint alleges Liggett, like other cigarette
manufactures, maintains direct relationships with its retailers.
See id. In an effort to foster its relationship with retailers,
Liggett alleges it provides direct discount payments to retailers
designed to reduce the retail price of its products and make
those products competitively priced to the consumer. See id.
Liggett alleges the relevant market effected by the EDLP plan
is the manufacture and sale of discount cigarettes throughout the
United States. See id. at ¶ 14. Liggett alleges that because of
the "substantial" price disparity between discount and premium
tobacco products (cigarettes, pipe tobacco and cigars), consumers
of discount cigarettes do not consider premium tobacco products
to be viable substitutes for discount cigarettes. See id.
Liggett further alleges manufacturers of cigarettes view discount
and premium cigarettes as distinctly different products. See
id. Liggett alleges, moreover, that industry analysts view
discount cigarettes as an entirely separate market. See id.
Liggett alleges RJR is one of four major cigarette
manufacturers in the United States and accounts for an estimated
30% of the discount cigarette sales in the country. See id. at
¶ 16. The Complaint further alleges the importance of RJR in the
discount cigarette market is magnified by the "high barriers"
unique to the entry into the market for the manufacture and sale
of discount cigarettes in the United States. See id. at ¶ 17.
For example, Liggett alleges the "entry barriers" include the
"requirements for extensive distribution organizations, large
capital outlays for sophisticated production equipment,
substantial inventory investment and costly promotional
As mentioned, the instant action challenges the EDLP plan
developed by RJR and implemented through the EDLP Contracts
entered into between RJR and various cigarette retailers. See
id. at ¶ 2. Liggett alleges the EDLP Contracts require retailers
to insure that no competitive cigarettes are priced below RJR
brand cigarettes. See id. In this regard, the Complaint alleges
RJR accomplishes its price-fixing "scheme" by requiring that
cigarette retailers, inter alia, raise the prices of competing
discount cigarettes in return for "substantial payments" (the
"EDLP Payments"). See id. at ¶¶ 2, 21.
Liggett further alleges that despite RJR competitors offering
retailers "substantial discounts" (for the purpose of reducing
the price of their product) the EDLP plan prohibits retailers
from lowering the price of competing discount cigarettes,
regardless of manufacturer discounts. See id. at ¶ 2. Liggett
alleges the EDLP Payments are made to retailers to compensate
them for the increased price and resultant decrease in sales of
competing discount cigarettes. See id. at ¶ 21. "The EDLP
Contracts thus have the effect of preventing retailers from
accepting any discounts from other manufacturers (Liggett) that
would lower the price of competing product below that of the RJR
product." Id. at ¶ 2.
The Complaint further alleges the anticompetitive effects of
the EDLP plan are "intensified" by the enforcement mechanism
implemented by RJR. See id. at ¶ 22. Liggett alleges that
retailers are required to rely upon their individual RJR sales
representative to explain and construe the obligations of the
retailers under the EDLP Contracts. See id.
EDLP Contracts specifically provide that the opinion
of the RJR representative is final regarding contract
interpretation. Cigarette retailers, fearing a loss
of EDLP Contract payments or other punitive measures
by RJR, succumb to obligations as set forth by their
RJR representatives. The requirements enforced by RJR
representatives often go beyond the express terms of
the EDLP Contracts.
In particular, Liggett alleges that the EDLP Contracts provide
in relevant part:
Retailer, if given certain pricing protection against
other competitive products, agrees to offer and
promote [RJR Discount Cigarette Brand] as its primary
cigarette in the lowest price category at the
everyday low price at all times and to provide
[Retailer's Store] with a minimum of one prominent
price communication sign, as well as preferred
merchandising space and locations as compared to
other products in the low price category.
Id. at ¶ 23. (alterations in the Complaint).
But for RJR's EDLP Contracts, there would be more
competition in the market for the manufacture and
sale of discount cigarettes in the United States.
RJR's unlawful conduct has caused and is causing
significant injury to competition in the relevant
market by, inter alia: (a) setting minimum retail
prices for discount cigarettes and fixing related
prices between RJR and Liggett's discount cigarettes;
(b) materially excluding and/or impeding Liggett and
other cigarette makers from competing on price for
the sale of discount cigarettes through retail
outlets by interfering with the manner in which
retail outlets price competing cigarette products;
(c) raising prices on discount cigarettes, reducing
output and/or otherwise distorting the competitive
and efficient operation of the retail cigarette
market that would otherwise prevail but for RJR's
unlawful practices; and (d) raising the costs of
other cigarette makers by hindering their efforts to
compete on price.
Id. at ¶ 27. Liggett further alleges it is unable to maintain
or increase sales "not because of weakened consumer demand but
because of the chokehold [sic] that RJR has placed at the retail
level of the relevant market, preventing Liggett from competing
on price and substantially reducing the volume of Liggett's sales
and profits." Id. at ¶ 28.
In Count one of the Complaint, Liggett alleges, inter alia,
the EDLP Contracts, as enforced by RJR, create a "naked
restraint" on interbrand price competition which constitutes a
per se violation of Section 1 of the Sherman Act. See Count
One, ¶¶ 31-34.*fn4
Liggett alleges RJR instituted a similar suit against Philip
Morris Inc. ("Philip Morris"), in the Middle District of North
Carolina (the "RJR North Carolina Case").*fn5 Liggett posits
that RJR alleged Philip Morris engaged in an interbrand
price-fixing scheme. Id. at ¶ 33. Liggett specifically alleges
"RJR admits that similar contracts imposed by Philip Morris
significantly restrict interbrand price competition." Id.
(quoting the RJR North Carolina Case Memorandum in Support of
Motion for Preliminary Injunction at 2). The Complaint, moreover,
alleges that RJR further argued that "[Philip Morris's]
substantial prohibition against competitive price promotions is
even more antithetical to competition than per se unlawful
vertical price-fixing, since the restraint here operates to
stifle interbrand and not simply intrabrand price competition."
Id. (quoting the RJR North Carolina Case Memorandum in Support
of Motion for Preliminary Injunction at 29).
In Count two of the Complaint, Liggett alleges the EDLP
Contracts have resulted in "actual detrimental effects," which
include price increases for discount cigarettes in the United
States; "and[,] or[,] the effective exclusion of Liggett and
other competitors from sales of discount cigarettes." Id. at ¶
36. Liggett further alleges these "detrimental effects" indicate
the EDLP Contracts constitute a violation of
Section 1 of the Sherman Act, 15 U.S.C. § 1. See id.
Liggett, moreover, alleges RJR does not have a legitimate
business purpose for instituting and enforcing the EDLP
Contracts. See id. at ¶ 38. In the alternative, Liggett alleges
that even assuming RJR has a legitimate business purpose for the
EDLP Contracts, that purpose is "far outweighed by the excessive
burdens imposed thereby, and any legitimate business purposes
could be accomplished by less restrictive means." Id.
In Count three of the Complaint, Liggett alleges the
"detrimental effects" resulting from the EDLP Contracts
constitute a per se violation of the New Jersey Antitrust Act
(the "New Jersey Antitrust Act"), N.J.S.A. 56:9-3.*fn6 See id.
at ¶ 41. In the alternative, the Complaint alleges that the
conduct of RJR constitutes a "rule of reason violation of the New
Jersey Antitrust Act."*fn7 Id. (citing N.J.S.A. 56:9-3).
In count four of the Complaint, it is alleged Liggett had, and
continues to have, a reasonable expectation of economic benefit
from its business relationships with cigarette retailers. See
id. at ¶ 45. Liggett also alleges RJR "knew of the existence of
Liggett's expectation of economic benefit . . . [and]
intentionally and wrongfully engaged in acts and conduct that
interfered with Liggett's expectation of economic benefit. . . ."
Id. at ¶ 46. Liggett further alleges it would have received its
anticipated economic benefit "but for RJR's interference." See
id. at ¶ 47. Liggett, moreover, alleges that the complained-of
conduct of RJR is not privileged and is without justification.
See id. at ¶ 48.
Finally, Liggett demands that RJR be enjoined from its practice
of "soliciting, entering into and enforcing exclusionary
contracts with retailers for the distribution and sale of
discount cigarettes, and from engaging in other practices
designed to foreclose and exclude Liggett from the relevant
market, pursuant to Section 16 of the Clayton Act." See id. at
¶¶ 34, 39, 43, pp. 13, ¶ b (citation omitted). Liggett also seeks
compensatory damages, as provided for by Section 4 of the Clayton
Act. See id. at pp. 13, ¶ d.
RJR argued the instant action should be transferred to the
Middle District of North Carolina, pursuant to Section 1404(a),
because the Middle District of North Carolina is the forum where
both Liggett and RJR maintain their principal place of business
and where the "central events giving rise to this suit occurred.
. . ." See Moving Brief at 1, 11; Blynn Declaration at ¶¶ 3, 6,
8, 9-11; Reply Brief at 1-7; Toulon Declaration at ¶¶ 2-3. In
addition, RJR argued that to the extent the EDLP plan caused
Liggett to experience reduced sales
of its discount cigarettes, the impact of the EDLP plan would be
most noticeably felt in the Middle District of North Carolina
(the location of the sole manufacturing facility and principal
place of business of Liggett). See Moving Brief at 2, 14; Blynn
Declaration at ¶¶ 2, 11; Reply Brief at 2-3, 7.
By contrast, Liggett argued that the "plaintiff's choice of a
proper forum is a paramount consideration," and "RJR has offered
no adequate reason to negate Liggett's choice of this [c]ourt as
the appropriate forum to try RJR's unlawful conduct." Opp. Brief
at 9. Specifically, Liggett argued that of its five "autonomous
strategic business units," (a three-branch marketing and sales
unit, a manufacturing unit and an executive unit), one of the
three co-equal headquarters for marketing and sales is located in
New Jersey.*fn8 See Opp. Brief at 12, 18; Petch Declaration at
¶¶ 3-11; Gallo Declaration at 5. Liggett, therefore, maintained
that its field sales managers and representatives from the NSBU
"are likely to be witnesses in any trial regarding the scope,
nature, and effects of RJR's EDLP program." Gallo Declaration at
¶ 5 (emphasis added). Liggett, however, also asserted that
"[b]ecause of the structure of [Liggett] . . . and based on our
investigation, we anticipate that roughly equal numbers of
Liggett's relevant witnesses and documents will be drawn from New
Jersey, North Carolina, and Texas." Id. at ¶ 6 (emphasis
added). In addition, Liggett argued that RJR is a New Jersey
corporation and maintains a regional sales office in New Jersey.
See Opp. Brief at 4.
Liggett, moreover, argued that because the EDLP plan operates
on a national scale, causing Liggett injury "in every state in
the nation," non-party witnesses could potentially include
"approximately 57,000 cigarette retailers nationwide. . . ."
See Opp. Brief at 1, 10 (emphasis added). In this regard,
Liggett identified twenty-three potential non-party retailer
witnesses. See id.; Gallo Declaration at ¶ 2. In addition,
Liggett asserted that these potential non-party witnesses "may
possess information related to the [EDLP] program's effects on
discount cigarette prices." Gallo Declaration at ¶ 2 (emphasis
added). As mentioned, Liggett also argued the majority of
relevant party proof will be produced from "outside of North
Carolina," as the "field offices of both parties will be the
source of a significant number of relevant witnesses and
documents." See Opp. Brief at 11-12; Petch Declaration at ¶ 8;
Gallo Declaration at ¶ 5. Finally, Liggett contended New Jersey
has a strong interest in "preventing businesses from engaging in
anticompetitive conduct within its borders, especially when that
conduct harms New Jersey consumers." See Opp. Brief at 14.
I. Standard of Review Under Section 1404(a)
Section 1404(a) authorizes a District Court to transfer a case
to any other district where venue is proper "[f]or the
convenience of the parties and witnesses, in the interests of
justice. . . ." 28 U.S.C. § 1404(a).*fn9 The purpose of Section
1404(a) is to avoid the waste of time, energy and money and, in
addition, to safeguard litigants, witnesses and the public
against avoidable inconvenience and expense. See Lexecon Inc.,
et al. v. Milberg Weiss Bershad Hynes & Lerach, et al.,
523 U.S. 26, 33, 118 S.Ct. 956, 140 L.Ed.2d 62 (1998); Jumara v. State
Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995); In re Emerson
Radio Corp., 52 F.3d 50, 55 (3d Cir. 1995); SmithKline Beecham
Corp. v. Geneva Pharmaceuticals, Inc., 2000 WL 217642 at *1
(E.D.Pa. Feb. 11, 2000); Westcode, Inc. v. RBE Electronics,
Inc., 2000 WL 124566 at *7 (E.D.Pa. Feb. 1, 2000); Ricoh Co.
Ltd. v. Honeywell, Inc., 817 F. Supp. 473 (D.N.J. 1993);
American Tel. & Tel. Co. v. MCI Communications Corp.,
736 F. Supp. 1294, 1305 (D.N.J. 1990).
There are three factors to consider when determining whether to
transfer a matter (1) the convenience of the parties, (2) the
convenience of the witnesses, and (3) the interests of justice.
See 28 U.S.C. § 1404(a); Jumara, 55 F.3d at 879; Geneva
Pharmaceuticals, Inc., 2000 WL 217642 at *1; Larami Ltd. v.
Yes! Entertainment Corp., 244 B.R. 56, 60-61 (D.N.J. 2000); RBE
Electronics, 2000 WL 124566 at *7; Hudson United Bank v. Chase
Manhattan Bank of Conn., NA, 832 F. Supp. 881, 887 (D.N.J. 1993),
aff'd, 43 F.3d 843 (3d Cir. 1994); Honeywell, 817 F. Supp. at
479. The transfer analysis is not limited, however, to these
The decision to transfer must incorporate "all relevant factors
to determine whether on balance the litigation [will] more
conveniently proceed and the interests of justice be better
served by transfer to a different forum." Geneva
Pharmaceuticals, Inc., 2000 WL 217642 at *1 (quoting Jumara,
55 F.3d at 879) (citation omitted); Yes! Entertainment, 244
B.R. at 60-61; Tischio v. Bontex, Inc., 16 F. Supp.2d 511, 519
(D.N.J. 1998); Rappoport v. Steven Spielberg, Inc.,
16 F. Supp.2d 481, 498 (D.N.J. 1998); Hudson United Bank, 832
F. Supp. at 888.
As mentioned, the alternative forum proposed by RJR in the
instant action is the Middle District of North Carolina. See
Moving Brief at 1; Blynn Declaration at ¶ 1; Reply Memorandum at
1; Toulon Declaration at ¶ 1. As a preliminary matter, it must be
determined whether the proposed transferee venue is one in which
the case "might have been brought." See 28 U.S.C. § 1404(a);
Jumara, 55 F.3d at 879; In re ...