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TI Investment Services, LLC v. Microsoft Corp.

United States District Court, D. New Jersey

May 30, 2014


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The Honorable Freda L. Wolfson, United States District Judge.

Before the Court is the Motion of Microsoft Corporation (" Defendant" ) to dismiss for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6), the Complaint of TI Investment Services, LLC (" TI" ), and World Phone Internet Services, Pvt. Ltd. (" World Phone" ), (collectively " Plaintiffs" ), which includes claims for violations of the Sherman Antitrust Act and the New Jersey Antitrust Act, along with claims under the New Jersey common law for unfair competition and tortious interference with prospective economic relations.

For the reasons that follow, this Court finds i) that Plaintiff TI Investment Services lacks standing to bring suit in this case; ii) that Plaintiff World Phone has inadequately alleged an antitrust injury and lacks standing to sue under the Sherman Act; iii) that the FTAIA exempts certain of the Defendant's conduct from the applicability of the Sherman Act; iv) that Plaintiff World Phone has inadequately alleged the relevant market for its antitrust claims; v) that Plaintiff World Phone has inadequately alleged the elements of a Sherman Act conspiracy; and vi) in the absence of federal claims the Court declines to exercise its supplemental jurisdiction over claims brought under New Jersey state law. Accordingly, the Complaint is dismissed.


The federal antitrust claims in this case all concern the alleged attempt to monopolize the market for Voice-over Internet Protocol (" VoIP" ) services for calls made between the United States and India. VoIP service providers enable users to make " telephone" calls to one another over the internet. These calls can be made directly from one computer or internet connected device to another computer or internet connected device, or can connect to the traditional telephone network. Calls of the former variety are often provided by VoIP service providers free of charge; this leaves providers heavily dependent for revenue upon the latter category of calls, those connecting computers or internet devices to telephones on the public switched telephone networks (" PSTN" ). The basic mechanism by which the VoIP service providers make money is simple. When a VoIP service subscriber makes a call using a computer or internet connected device to a traditional telephone on the PSTN, the VoIP service provider charges a flat or per minute fee to connect the call over the internet. A similar fee is charged when a VoIP service subscriber receives a call originating from a traditional telephone on the PSTN.

The government of India regulates VoIP services through the Ministry of Communications and Information Technology, Department of Telecommunications (" Ministry of Communications" ). Pursuant to a 2002 Indian law, companies seeking to provide VoIP services in India must be licensed by the Ministry of Communications. These licenses, among other conditions, require that VoIP service providers 1) provide semiannual reports to the government on the quality of services provided to their subscribers; 2) provide services to rural users on a non-discriminatory basis; 3) pay the Indian government an annual licensing fee of 6% of their adjusted gross revenue; and 4) locate in or relocate to India all necessary infrastructure for

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the processing, routing, directing, managing, or authenticating of their VoIP calls. This final requirement was to be complied with no later than January 1, 2008.[1]

Plaintiff World Phone is a provider of VoIP services in India.[2] Defendant Microsoft is also a provider of VoIP services, including in the Indian market, having gained worldwide VoIP capability with its acquisition of Skype in 2011. Both companies provide services including the connecting of calls over the internet from India to the United States and from the United States to India. Plaintiff World Phone is a licensed Indian VoIP service provider and is alleged to have fully complied with the requirements of the Ministry of Communications' licensing regime. This compliance includes the costly 2008 relocation of all of Plaintiff's VoIP infrastructure -- primarily server banks -- from New Jersey to India. By contrast, Plaintiffs allege that Defendant and other multi-national companies have not obtained a license from the Ministry of Communications and have not complied with the mandates of the licensing regime. Defendant allegedly does not file semiannual reports, does not pay annual licensing fees, and has not relocated any of its VoIP infrastructure from the United States to India. The specific violations of the other noncompliant companies are not enumerated in the Complaint.

Plaintiffs allege that Defendant's noncompliance is intentional. Many of the requirements of the Indian licensing regime impose costs upon VoIP service providers -- either in the form of direct taxes or indirect increased operating expenses. By allegedly avoiding the costs associated with licensing, in violation of Indian law, Defendant is able to offer its VoIP services at a lower price than Plaintiff World Phone and other Indian-law-compliant providers. Plaintiffs allege that Defendant is utilizing this unlawful price advantage to win customers that would otherwise have used Plaintiff World Phone's services, with the aim of eventually driving Plaintiff World Phone and other compliant companies out of the VoIP services industry, thereby monopolizing the market of VoIP calls between the United States and India.[3]


Plaintiffs filed the Complaint in the instant matter on August 12, 2013. In Count I of the Complaint, Plaintiffs allege that Defendant engaged in a conspiracy in restraint of trade in violation of Section 1 of the Sherman Act and an attempt to monopolize trade or commerce with a foreign nation in violation of Section 2 of the Sherman Act.[4] Counts II, III, and IV of

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the Complaint allege state law causes of action. On October 11, 2013, Defendant moved to dismiss the complaint for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). Specifically, Defendant contends that Plaintiffs fail to state a claim for relief under the Sherman Act because (i) the Complaint does not adequately allege antitrust injury, (ii) the FTAIA exempts Defendant's conduct from the scope of the Sherman Act, (iii) Plaintiffs have failed to allege all necessary elements of a monopolization claim under the Act, and (iv) Plaintiffs have failed to allege all necessary elements of a conspiracy claim under the Act. Defendant also moves to dismiss all claims brought by Plaintiff TI Investment Services for lack of standing, and to dismiss all state law claims.


When considering a motion to dismiss a complaint for failure to state a claim upon which relief can be granted, pursuant to Fed.R.Civ.P. 12(b)(6), a court must accept all well-pleaded allegations in the complaint as true and view them in the light most favorable to the plaintiff. Evancho v. Fisher, 423 F.3d 347, 351 (3d Cir. 2005). It is well settled that a pleading is sufficient if it contains " a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). However, " [a]lthough the Federal Rules of Civil Procedure do not require a claimant to set forth an intricately detailed description of the asserted basis for relief, they do require that the pleadings give defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Baldwin Cnty. Welcome Ctr. v. Brown, 466 U.S. 147, 149-50 n. 3, 104 S.Ct. 1723, 80 L.Ed.2d 196 (1984) (quotation and citation omitted). A district court, in weighing a motion to dismiss, asks " 'not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claim.'" Bell Atlantic v. Twombly, 550 U.S. 544, 583, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)); see also Ashcroft v. Iqbal, 556 U.S. 662, 684, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (" Our decision in Twombly expounded the pleading standard for all civil actions." ) (internal citations omitted); Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (" Iqbal . . . provides the final nail-in-the-coffin for the 'no set of facts' standard that applied to federal complaints before Twombly." ).

Following the Twombly/Iqbal standard, the Third Circuit applies a two-part analysis in reviewing a complaint under Rule 12(b)(6). First, a district court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Fowler, 578 F.3d at 210. Second, a district court must determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a " plausible claim for relief." Ibid. A complaint must do more than allege the plaintiff's entitlement to relief. Ibid.; see also

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Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (stating that the " Supreme Court's Twombly formulation of the pleading standard can be summed up thus: 'stating ... a claim requires a complaint with enough factual matter (taken as true) to suggest' the required element. This 'does not impose a probability requirement at the pleading stage,' but instead 'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element." ). A court need not credit either " bald assertions" or " legal conclusions" in a complaint when deciding a motion to dismiss. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1429-30 (3d Cir. 1997). The defendant bears the burden of showing that no claim has been presented. Hedges v. U.S., 404 F.3d 744, 750 (3d Cir. 2005) (citing Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991)). Finally, a court in reviewing a Rule 12(b)(6) motion must only consider the facts alleged in the pleadings, the documents attached thereto as exhibits, and matters of judicial notice. Southern Cross Overseas Agencies, Inc. v. Kwong Shipping Grp. Ltd., 181 F.3d 410, 426 (3d Cir. 1999).

IV. JURISDICTION: 28 U.S.C. § 1331

A district court may exercise original jurisdiction over " Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their authority." U.S. Const. art. III., § 2; see also 28 U.S.C. § 1331. In the Complaint, Plaintiff alleges, inter alia, violation of the Sherman Act, 15 U.S.C. § § 1 and 2. The Court, accordingly, has original jurisdiction over this matter as arising under the laws of the United States.[5]


A. Plaintiff TI Investment Services, LLC

Defendant challenges the standing of Plaintiff TI Investment Services to sue under the Sherman Act. Specifically, Defendant contends that TI has not suffered an antitrust injury independent of that suffered by World Phone, and can claim injury in this case, if at all, only as the majority shareholder of World Phone. Because shareholders do not have standing to bring suit arising from injuries suffered purely by the corporations they own, Defendant argues TI lacks standing in this case. The Court agrees.

It is well established in this Circuit that the Sherman Act, as amended by the Clayton Act, does not create a cause of action for " indirect harm that the ...

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