NOT FOR PUBLICATION FILED

UNITED STATES COURT OF APPEALS OCT 27 2021

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

SUMOTEXT CORP., No. 20-17245

Plaintiff-Appellant, D.C. No. 5:16-cv-01370-BLF

v.

MEMORANDUM*

ZOOVE, INC., DBA Starstar Mobile; et al.,

Defendants-Appellees.

Appeal from the United States District Court for the Northern District of California Beth Labson Freeman, District Judge, Presiding

Submitted October 22, 2021** San Francisco, California

Before: BADE and BUMATAY, Circuit Judges, and SESSIONS,*** District Judge.

Sumotext Corp. appeals the district court’s dismissal of Mblox, Inc. at the

pleadings stage and the district court’s entry of judgment, after a jury trial, in favor

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). *** The Honorable William K. Sessions III, United States District Judge for the District of Vermont, sitting by designation. of Zoove, Inc., Virtual Hold Technology, LLC (“VHT”), StarSteve, LLC, and

VHT StarStar, LLC (collectively, the “Joint Defendants”). We have jurisdiction

under 28 U.S.C. § 1291, and we affirm.

1. The district court properly dismissed Sumotext’s claims against

Mblox under §§ 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. To withstand a

motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure,

Sumotext’s complaint had to plead “enough facts to state a claim to relief that

[was] plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

To state a § 1 claim, Sumotext needed to plead evidentiary facts establishing (1) an

agreement or conspiracy, (2) to harm or restrain trade, (3) which injured

competition. Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1047 (9th Cir. 2008). To

state a plausible claim under § 2, Sumotext had to allege “(1) the existence of a

combination or conspiracy to monopolize; (2) an overt act in furtherance of the

conspiracy; (3) the specific intent to monopolize; and (4) causal antitrust injury.”

Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d 1145, 1158 (9th Cir. 2003).

Sumotext’s complaint is devoid of evidentiary facts which, if true, would

establish that Mblox joined a conspiracy to restrain trade. Sumotext argues that a

letter of intent executed by Mblox and StarSteve is “direct evidence” that Mblox

entered an anticompetitive agreement. But the terms that Sumotext complains of

were part of a “proposal” for a “Possible Acquisition,” and nothing suggests that

2 those terms were incorporated into a definitive agreement or that Mblox otherwise

agreed to be bound by them. See Steckman v. Hart Brewing, Inc., 143 F.3d 1293,

1295–96 (9th Cir. 1998) (“[W]e are not required to accept as true conclusory

allegations which are contradicted by documents referred to in the complaint.”).

Mblox’s decision to assign its contracts to Zoove and then sell the company to

VHT could just as easily suggest a lawful, arms-length transaction as it could an

illegal conspiracy. See Kendall, 518 F.3d at 1049 (“Allegations of facts that could

just as easily suggest rational, legal business behavior by the defendants as they

could suggest an illegal conspiracy are insufficient to plead a violation of the

antitrust laws.”). And Sumotext’s allegation that Mblox engaged in a horizontal

restraint on trade does not save its claim from dismissal. See William O. Gilley

Enters., Inc. v. Atl. Richfield, Co., 588 F.3d 659, 663 (9th Cir. 2009) (“Whether a

plaintiff pursues a per se claim or a rule of reason claim under § 1, the first

requirement is to allege a contract, combination in the form of trust or otherwise,

or conspiracy.” (internal quotation marks omitted)).

Sumotext’s § 2 claim is also deficient because the complaint does not

adequately allege that Mblox joined a conspiracy to monopolize. Sumotext baldly

alleges that Mblox “joined, furthered, [and] profited from a Conspiracy to

monopolize the national Market for dial codes.” But the complaint is “devoid of

further factual enhancement,” and thus fails to “state a claim to relief that is

3 plausible on its face.” See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal

quotation marks omitted). Sumotext’s arguments against dismissal are not well

taken. Sumotext contends “the district court failed to even address [its] separate

§ 2 allegations,” but this contention is baseless. The district court addressed both

of Sumotext’s antitrust claims against Mblox and dismissed the claims because

Sumotext “failed to allege facts showing that Mblox joined the alleged

conspiracies.” Sumotext’s argument suggesting Mblox withdrew from the alleged

conspiracy misconstrues the district court’s order. The district court did not assess

whether Mblox withdrew from an alleged conspiracy to monopolize; instead, the

district court correctly found that Sumotext did not allege facts showing that

Mblox joined the alleged conspiracy in the first place. Therefore, dismissal of

Sumotext’s claims against Mblox was warranted.

2. The district court applied the correct legal standard when resolving

Sumotext’s motion to exclude the testimony of Debra Aron, Ph.D., the Joint

Defendants’ expert witness. Rule 702 of the Federal Rules of Evidence governs

the admissibility of expert testimony. Estate of Barabin v. AstenJohnson, Inc., 740

F.3d 457, 463 (9th Cir. 2014) (en banc), overruled on other grounds by United

States v. Bacon, 979 F.3d 766 (9th Cir. 2020) (en banc). To satisfy Rule 702,

expert testimony must be relevant and reliable. Id. The district court

acknowledged these requirements and performed a “flexible inquiry” because

4 “Sumotext’s challenges [were] not framed in terms of the four factors discussed in

Daubert.” See Wendell v. GlaxoSmithKline LLC, 858 F.3d 1227, 1232 (9th Cir.

2017) (noting the Rule 702 “inquiry is flexible” and “should be applied with a

liberal thrust favoring admission” (internal quotation marks omitted)). The district

court therefore applied the correct legal standard when resolving Sumotext’s

motion to exclude.

The district court did not abuse its discretion in finding Dr. Aron’s testimony

to be sufficiently reliable. Barabin, 740 F.3d at 460 (reviewing the admission of

expert testimony for an abuse of discretion). Dr. Aron’s testimony had a “reliable

basis in the knowledge and experience of [her] discipline.” Kumho Tire Co. v.

Carmichael, 526 U.S. 137, 148 (1999) (quoting Daubert v. Merrell Dow Pharms.,

Inc., 509 U.S. 579, 592 (1993)). She formed her opinions based on a variety of

sources, including industry publications and industry executives’ deposition

testimony.

Even assuming the district court abused its discretion by failing to make an

express relevancy finding, the error was harmless. See United States v. Jawara,

474 F.3d 565, 583 (9th Cir. 2007). Dr. Aron’s testimony did not prejudice

Sumotext because “it is more probable than not that the jury would have reached

the same verdict even if the evidence had not been admitted.” Barabin, 740 F.3d

at 465 (quoting Jules Jordan Video, Inc. v. 144942 Can. Inc., 617 F.3d 1146, 1159

5 (9th Cir. 2010)). Moreover, “the record shows that [Dr. Aron’s] testimony

satisfied the requirements for admission.” United States v. Ruvalcaba-Garcia, 923

F.3d 1183, 1190 (9th Cir. 2019) (internal quotation marks omitted). Expert

testimony is relevant if “it logically advances a material aspect of the proposing

party’s case.” Daubert v. Merrell Dow Pharms., Inc., 43 F.3d 1311, 1315 (9th Cir.

1995). By highlighting alleged flaws in Dr. Sullivan’s methodology and market

definitions, Dr. Aron’s testimony undermined Sumotext’s antitrust claims and

“logically advance[d]” the Joint Defendants’ defense. Id. Her testimony thus

clears relevancy’s low bar. Messick v. Novartis Pharms. Corp., 747 F.3d 1193,

1196 (9th Cir. 2014).

We also reject Sumotext’s argument that Dr. Aron improperly testified as a

summary witness. “An expert may base an opinion on facts or data in the case that

the expert has been made aware of or personally observed.” Fed. R. Evid. 703.

Dr. Aron formed her opinions based on, inter alia, her experience as an economist,

her review of customer data and financial data provided by the parties, independent

industry research, and her review of deposition testimony. Synthesizing that

information, Dr. Aron criticized Dr. Sullivan’s opinions. Dr. Aron did not simply

repeat testimony offered by lay witnesses at trial. Accordingly, the district court

6 did not commit reversible error.1

3. The district court properly required Sumotext to prove by a

preponderance of the evidence a relevant antitrust market. Sumotext challenges

the application of the burden of proof on three grounds, none of which are

persuasive. First, Sumotext’s argument that the district court required it “to prove

the existence of the relevant market circumstantially” is belied by the record. The

district court instructed the jury to consider both direct and circumstantial

evidence, and Sumotext presented what it describes as “direct evidence” of harm to

competition and supracompetitive prices to the jury.

Second, Sumotext contends “the district court erroneously heightened [its]

burden of proof” by “making the relevant market definition a threshold issue at

trial.” We construe this argument as a challenge to the jury instructions and verdict

form and conclude that Sumotext waived its objections. Sumotext stipulated to a

jury instruction that stated it was Sumotext’s “burden to prove the existence of a

relevant market,” and Sumotext proposed the verdict form that listed the relevant

market definitions as threshold questions. Consequently, Sumotext waived review

of its challenges to the jury instruction and verdict form. See Crowley v. Epicept

1 Sumotext identifies three objections that it made at trial, but it does not develop an argument based on those objections. We conclude that Sumotext has abandoned the issue, and our refusal to review the issue will not result in manifest injustice. See Leer v. Murphy, 844 F.2d 628, 634 (9th Cir. 1988); see also Fed. R. App. P. 28(a)(8)(A).

7 Corp., 883 F.3d 739, 748 (9th Cir. 2018) (per curiam) (“Waiver of a jury

instruction occurs when a party considers the controlling law . . . and, in spite of

being aware of the applicable law, proposed or accepted a flawed instruction.”

(internal quotation marks omitted)); see also United States v. Reed, 147 F.3d 1178,

1180 (9th Cir. 1998) (“Verdict forms are, in essence, instructions to the jury.”).

Sumotext’s third argument—that the district court “heightened [its] burden

of proof by requiring it to disprove a scattershot of economic theories asserted

without economic evidence or expert foundation”—fares no better. An antitrust

plaintiff generally bears the burden of proving a relevant market. See Ohio v. Am.

Express Co., 138 S. Ct. 2274, 2284–85 (2018). A “relevant market is defined as

the area of effective competition.” Id. at 2285 (internal quotation marks omitted).

It includes “the product at issue as well as all economic substitutes for the

product.” Newcal Indus., Inc. v. Ikon Off. Sol., 513 F.3d 1038, 1045 (9th Cir.

2008) (citing Brown Shoe Co. v United States, 370 U.S. 294, 325 (1962)).

Sumotext’s expert, Dr. Sullivan, offered two market definitions, both narrowly

construed to include only StarStar numbers. The Joint Defendants called witnesses

at trial who testified about various products that compete with StarStar numbers

and criticized Dr. Sullivan’s market definitions. The district court properly

allowed the Joint Defendants to rebut Dr. Sullivan’s opinion. We reject

Sumotext’s attempt to disclaim its burden of proof. supported by substantial evidence, which is evidence adequate to support the jury’s

conclusion, even if it is also possible to draw a contrary conclusion.”). The jury

found that Sumotext failed to prove by a preponderance of the evidence a relevant

market for leasing or servicing StarStar numbers in the United States. Testimony

from industry executives provided substantial evidence showing that the relevant

markets were broader than Sumotext proposed. Dr. Aron’s testimony criticizing

Dr. Sullivan’s market definitions, as well as his methodology, provided additional

support for the jury’s verdict. See Humetrix, Inc. v. Gemplus S.C.A., 268 F.3d 910,

919 (9th Cir. 2001) (“Authority to determine the victor in such a ‘battle of expert

witnesses’ is properly reposed in the jury.”). Thus, because the jury’s verdict is

supported by substantial evidence, it must stand.

5. The district court did not abuse its discretion in denying Sumotext’s

motion for a new trial under Rule 59 of the Federal Rules of Civil Procedure.

Flores v. City of Westminster, 873 F.3d 739, 755–56 (9th Cir. 2017) (reviewing a

“district court’s denial of a motion for new trial for abuse of discretion”). When

evaluating Sumotext’s Rule 59 motion, the district court properly weighed the

evidence presented at trial, including expert testimony, evidence of price increases,

evidence of reduced output, evidence of excluded competitors, and other

9 restraining factors. Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir. 2007)

(noting that when assessing a “Rule 59 motion of the party against whom a verdict

has been returned, the district court has the duty . . . to weigh the evidence as [the

court] saw it” (alterations in original) (internal quotation marks omitted)). After

conducting a thorough analysis, the district court concluded that the jury’s verdict

was not against the clear weight of the evidence. Flores, 873 F.3d at 748 (“We

will grant a new trial only if the verdict is against the clear weight of the evidence,

and not simply because the evidence might have led us to arrive at a different

verdict.”). Sumotext has not demonstrated that this decision was “a plain error,

discretion exercised to an end not justified by the evidence,” or “clearly against the

logic and effect of the facts as are found.” Rabkin v. Or. Health Scis. Univ., 350

F.3d 967, 977 (9th Cir. 2003) (internal quotation marks omitted).

AFFIRMED.

10