1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 U.S. WHOLESALE OUTLET & Case No.: CV 18-1077 CBM (Ex) DISTRIBUTION, INC. et al, 12 Plaintiffs, ORDER RE: COURT’S FINDINGS 13 OF FACT AND CONCLUSIONS OF vs. LAW 14 LIVING ESSENTIALS, et al, 15 Defendants. 16 17 18 This Order constitutes findings of fact and conclusions of law pursuant to 19 Fed. R. Civ. P. 52(a). 20

FINDINGS OF FACT

21 1. The seven Plaintiffs are wholesale businesses that sell, among other 22 merchandise, 5-hour ENERGY® in California. (Jury Instructions (ECF No. 498)1 23 (“Inst.”) No. 3, ¶ 1; Amended Pretrial Conference Order (ECF No. 386) (“Am. 24 PTCO”) at ¶ 5.1.) 25 2. Defendants Living Essentials, LLC and Innovation Ventures, LLC are 26 Michigan limited-liability companies with their principal place of business in 27 28 1 Oakland County, Michigan. (Answer to Second Amended Complaint (ECF No. 2 39) (“Answer”) ¶ 27.) 3 3. Living Essentials, LLC is the manufacturer and distributor of 5-hour 4 ENERGY®, and Innovation Ventures, LLC is its corporate parent. Both 5 companies are referred to together as “Living Essentials.” (Inst. No. 3, ¶ 2; Am. 6 PTCO at ¶ 5.2.) 7 4. Living Essentials has manufactured and sold 5-hour ENERGY® 8 since 2004. 9 5. Living Essentials manufactures all bottles of 5-hour ENERGY® in 10 Wabash, Indiana, and then sells and distributes them around the country, including 11 California. 12 10. Living Essentials uses an independent broker to sell 5-hour ENERGY 13 to Costco Wholesale Corporation. At different times during the relevant period, 14 those brokers were Level One Marketing, Advantage Sales & Marketing, and 15 Innovative Club Partners. (Inst. No. 3, ¶ 6; Am. PTCO at ¶ 5.6.) 16 #*. Living Essential also uses independent broker, Paramount Sales 17 Group, to sell 5-hour Energy to Plaintiffs and other wholesalers in California. 18 11. Costco operates two types of stores, the “regular” Costco stores, 19 which cater to consumers, and a separate type called the Costco Business Centers, 20 which cater primarily—but not exclusively—to small businesses. (Inst. No. 3, ¶ 7; 21 Am. PTCO at ¶ 5.7.) 22 12. From 2012 to December 2015 there were four Costco Business 23 Centers in California (Commerce, San Diego, Hawthorne, and Hayward). In 24 December 2015, the Westminster Costco Business Center was opened. In August 25 2017, Burbank and South San Francisco Costco Business Centers were opened. 26 (Inst. No. 3, ¶ 8; Am. PTCO at ¶ 5.8.) 27 13. There was at least one Costco Business Center in close proximity to 28 each of the Plaintiffs or their customers. (Ex. 364-3 3 (maps showing locations of 1 Plaintiffs’ businesses and Costco Business Centers) & 10/15 Tr. 20:24-21:11; see 2 also 10/3 Tr. 122:12-17 (Mansour); 10/4 Tr. 35:4-25 (Amini); 10/4 Tr. 96:5-97:15 3 (Rashid); 10/4 Tr. 131:10-132:4 (Kohanim); 10/7 Tr. 157:12-19 (Ali); 10/7 Tr. 4 178:4-12, 259:17-260:3, 263:15-18 (Wahidi); 10/10 Tr. 220:15-221:16, 225:1-21 5 (Krishan); 10/10 Tr. 238:25-239:2 (Pae); 10/15 Tr. 69:17-70:6 (Paulus).) 6 14. Living Essentials’ “list price” to Plaintiffs was $1.45 per bottle for 7 regular strength and $1.60 per bottle for extra-strength 5-hour ENERGY® from 8 January 2012 through January 2019. (Answer ¶ 41; Response to RFA (ECF No. 9 179-1) No. 7; Exs. 872-878.) 10 15. Living Essentials’ “list price” to Costco was $1.35 per bottle for 11 regular strength and $1.50 per bottle for extra-strength 5-hour ENERGY® from 12 January 2012 through January 2019. (Answer ¶ 41; Response to RFA (ECF No. 13 179-1) No. 8; Ex. 879.) 14 16. On January 14, 2019, Living Essentials increased its “list price” to 15 Plaintiffs and Costco by $.05 per bottle. (Exs. 872-879.) 16 18. Living Essentials sold 5-hour ENERGY® drinks in bottles of like 17 grade and quantity. (Proposed PTCO at 5 (“Defendants do not dispute that 5-hour 18 ENERGY® are sold in bottles of like grade and quantity.”); Order re Motions for 19 Summary Judgment (ECF No. 289) at 4; Answer ¶ 30.) 20 CONCLUSIONS OF LAW 21 I. Robinson-Patman Act 22 315. Under the Clayton Act as amended by the Robinson-Patman Act 23 (“RPA”), 15 U.S.C. §13(d): “Payment for services or facilities for processing or 24 sale. It shall be unlawful for any person engaged in commerce to pay or contract 25 for the payment of anything of value to or for the benefit of a customer of such 26 person in the course of such commerce as compensation or in consideration for 27 any services or facilities furnished by or through such customer in connection with 28 the processing, handling, sale, or offering for sale of any products or commodities 1 manufactured, sold, or offered for sale by such person, unless such payment or 2 consideration is available on proportionally equal terms to all other customers 3 competing in the distribution of such products or commodities.” 4 316. In order to prevail on a Section 2(d) claim, a plaintiff must prove: (1) 5 sales made in interstate commerce; (2) sales of commodities of like grade and 6 quality; (3) actual competition between the alleged favored and disfavored 7 purchaser for the same customers and the same dollars; (4) that the seller paid the 8 alleged favored purchaser for services or facilities (promotional allowances) to be 9 used primarily to promote the resale of the product that were not available on 10 proportionately equal terms and which also requires the purchasers to be operating 11 at the same functional levels in the supply chain; and (5) damages which, in a 12 private plaintiff antitrust case such as this, each plaintiff must prove antitrust 13 injury, which means the type of injury the antitrust laws were designed to prevent, 14 which was a material cause of each plaintiff’s injury. 15 U.S.C. § 13(d); Volvo 15 Trucks N. Am., Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 164 (2006); Woodman’s 16 Food Market, Inc. v. Clorox Co., 833 F.3d 743 (7th Cir. 2016); Feesers, Inc. v. 17 Michael Foods, Inc., 591 F.3d 191 (3d Cir. 2010); England v. Chrysler Corp., 493 18 F.2d 269, 271-72 (9th Cir. 1974). 19 318. The RPA protects competition between specific firms competing for 20 the same retail customers for the same product. Volvo, 546 U.S. at 177-79; see 21 also M.C. Mfg. Co. v. Tex. Foundries, Inc., 517 F.2d 1059, 1068 n.20 (5th Cir. 22 1975) (“Competition is determined by careful analysis of each party’s customers. 23 Only if they are each directly after the same dollar are they competing.”) 24 319. One of the foundational analyses in antitrust is the definition of a 25 market, which is based in part on analysis of cross-elasticity of demand between 26 various firms that might potentially compete. United States v. E.I. du Pont de 27 Nemours & Co., 351 U.S. 377, 400 (1956) (cross-elasticity of demand is indicated 28 by “responsiveness of the sales of one product to price changes of the other”); 1 Eastman Kodak Co. v. Image Tech., 504 U.S. 451, 469 (1992) (analysis of 2 competition based on “cross-elasticity of demand,” meaning “extent to which 3 consumers will change their consumption of one product in response to a price 4 change in another”). “[W]hen demand for the commodity of one producer shows 5 no relation to the price for the commodity of another producer, it supports the 6 claim that the two commodities are not in the same relevant market.” Forsyth v. 7 Humana, 114 F.3d 1467, 1477 (9th Cir. 1997), overruled on other grounds, 693 8 F.3d 896, 927 (9th Cir. 2012). 9 320. [T]he disfavored purchaser and the favored purchaser must be in the 10 same geographic market.” Lewis v. Philip Morris Inc., 355 F.3d 515, 521 (6th Cir. 11 2004); accord Tri-Valley Packing Ass’n v. FTC, 329 F.2d 694, 708-09 (9th Cir. 12 1964). 13 323. A proper analysis of the existence of competition involves a 14 systematic study of sales and pricing – a determination of consumer price 15 sensitivity and demand substitution - to show actual linkage between the two firms 16 in terms of whether they are competing for the same dollar. Volvo, supra at 179- 17 81; Hasbrouck v. Texaco, Inc., 842 F.2d 1034, 1041 (9th Cir. 1987). 18 A. Implicit Findings by the Jury 19 324. To state a claim, Plaintiffs have the burden to prove that Plaintiffs 20 competed with Costco. Whether Plaintiffs and Costco are competing with each 21 other is an overlapping factual determination for both the claims under 15 U.S.C. 22 §13(a) and 13(d) (the Section 2(a) and 2(d) claims) of the RPA. Volvo Trucks 23 N.Am., Inc., v. Reeder-Simco GMC, Inc., 546 U.S. 164 (2006); England v. 24 Chrysler Corp., 493 F.2d 269, 271-72 (9th Cir. 1974); Tri-Valley Packing Ass’n v. 25 F.T.C., 329 F.2d 694, 707 (9th Cir. 1964). 26 325. The dominant issue addressed in one form or another by almost every 27 witness was the issue of whether Plaintiffs compete with Costco. 28 1 326. The Jury’s rejection of liability in Question 1 of the Verdict on the 2 2(a) claim implicitly rejected Plaintiffs’ theory that Plaintiffs and Costco are 3 competing with each other. In cases where legal claims are tried by a jury, 4 equitable claims are tried by a judge, and the claims are based on the same facts, 5 the “Seventh Amendment requires the Court to follow the jury’s implicit or 6 explicit factual determinations” in deciding the equitable claims. Los Angeles 7 Police League v. Gates, 995 F.2d 1469, 1473 (9th Cir. 1993). 8 327. Therefore, this Court will follow the jury’s implicit finding of a lack 9 of competition and hold that Plaintiffs did not prove, as they must, that they were 10 in competition with Costco. 11 328. This Court has also twice denied Plaintiffs’ motion for judgment as a 12 matter of law [ECF No. 550 at 144:7-14 and ECF No. 589 (Minutes of Telephone 13 Status Conference)] and denied Plaintiffs’ motion for a new trial on the Section 14 2(a) claims. [ECF No. 589 (Minutes of Telephone Status Conference)] Since 15 liability was not established, Plaintiffs are not entitled to any relief, whether legal 16 or equitable, under Section 2(a). 17 B. The Court’s Independent Review of the Evidence on the Question 18 of Competition Results in a Finding that Plaintiffs Have Not 19 Proven the Existence of Competition and Defendants Have 20 Proven the Lack of Competition 21 350. This Court finds that Defendants proved that Plaintiffs and 22 Costco were not in competition with each other. 23 C. Plaintiffs Did Not Prove Antitrust Injury 24 352. “Absent actual competition with a favored dealer ...[Plaintiffs] cannot 25 establish the competitive injury required under the” RPA. See Volvo, 546 U.S. at 26 177. Having concluded that Plaintiffs have not proven they competed with 27 Defendants, it follows that Plaintiffs likewise cannot prove an antitrust injury. 28 1 D. Plaintiffs and Costco Do Not Operate on the Same Functional 2 Level 3 367. In order to prevail, Plaintiffs must show that promotional allowances 4 are not available on proportionally equal terms to competing customers. 15 U.S.C. 5 §13(d). The trial record shows that Defendants made promotional allowances 6 available on proportionally equal terms here. The evidence was unrebutted at trial 7 that Defendants treated participants within the relevant distribution channels (the 8 C-Store channel on the one hand and the Club channel on the other) the same, 9 offering the same pricing, discounts, and promotions within each channel. 10 368. If Plaintiffs and Costco occupy different places in the channels of 11 distribution, they do not operate at the same functional level. If they do not operate 12 at the same functional level, Plaintiffs cannot prevail on their claim. Plaintiffs must 13 show that they and Costco “are operating solely on a particular functional level 14 such as wholesaler or retailing.” Tri-Valley, supra, at 708 (bold added) 15 (competitors at issue were both wholesalers). 16 369. The evidence showed that Plaintiffs and Costco do not occupy the 17 same functional level. Unlike Costco, Plaintiffs are not retailers. Plaintiffs are 18 wholesalers that resell to convenience stores, jobbers, and other wholesalers, 19 rather than to the ultimate consumer. On the other hand, the vast majority of 20 Costco’s sales were made to ultimate consumers. Because Plaintiffs and Costco 21 are on different functional levels, Plaintiffs have not met the requirements under 22 §2(d). See also, Bryant Corp., 1994 WL 745159 at *5 granting summary judgment 23 to defendant on RPA claim, in part, because the plaintiff “failed to show that . . . an 24 Oregon retail dealer selling to consumers, and . . .a Washington wholesale 25 distributor selling to retail dealers, were in actual, functional competition with one 26 another as required to establish price discrimination under the Robinson-Patman 27 Act.”). 28 1 II. California Unfair Competition Law (“UCL”) Cal. Bus. & Prof. Code § 2 17200 and §17205 3 382. In order to succeed on a UCL claim, Plaintiffs must prove “unfair 4 competition,” which “shall mean and include any unlawful, unfair or fraudulent 5 business act or practice and unfair, deceptive, untrue or misleading advertising and 6 any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of 7 Division 7 of the Business and Professions Code.” Cal. Bus. & Prof. Code § 8 17200. 9 383. “An action for unfair trade practices under [Cal. Bus. & Prof. Code] § 10 17200, arises when a business practice offends an established public policy or 11 when the practice is immoral, unethical, oppressive, unscrupulous, or substantially 12 injurious to consumers.” Wolfe v. State Farm Fire & Casualty Ins. Co., 46 Cal. 13 App. 4th 554, 562 (Cal. App. 1996). 14 386. Plaintiffs have long maintained that the conduct underlying their UCL 15 claim is the same conduct that underlies their RPA claims. Since the jury already 16 returned a verdict against Plaintiffs as to their Section 2(a) claim, and Plaintiffs 17 similarly failed to establish liability on their Section 2(d) claim, they are therefore 18 not entitled to any relief on their UCL claim. The law is clear that where the same 19 underlying conduct is alleged to underlie a UCL claim and an RPA claim, the 20 claims will rise and fall together. See Consumer Def. Group v. Rental Hous. Indus 21 Members, 137 Cal. App. 4th 1185, 1220 (2006) (dismissing UCL claim where 22 predicate claims were dismissed); LiveUniverse, 304 Fed. App’x. at 557–58 23 (2008); Chavez, Cal. App. 4th at 375. 24 389. The Court therefore concludes that, because Plaintiffs’ unfair 25 competition claim under the UCL is predicated on the same conduct that underlies 26 Plaintiffs’ price discrimination claims under the RPA, Plaintiffs’ UCL claim fails if 27 their price discrimination claims fail. Petroleum Sales, Inc. v. Valero Ref. Co., 304 28 F. App’x. 615, 617 (9th Cir. 2008). 1 393. Conduct determined not to violate antitrust laws cannot be considered 2 unfair under the UCL where the same underlying conduct underlies both claims. 3 “If the same conduct is alleged to be both an antitrust violation and an ‘unfair’ 4 business act or practice for the same reason—because it unreasonably restrains 5 competition and harms consumers—the determination that the conduct is not an 6 unreasonable restraint of trade necessarily implies that the conduct is not ‘unfair’ 7 toward consumers.” Chavez v. Whirlpool Corp., 93 Cal. App. 4th 363, 375 (Cal. 8 Ct. App. 2001). California courts have noted that permitting a separate inquiry 9 into conduct that was held not to violate federal antitrust prohibitions but that 10 presents essentially the same question under the UCL only invites conflict and 11 uncertainty and could lead to enjoining procompetitive conduct. See id. (citing 12 Cel-Tech Comms. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 185 (1999)). 13 394. Plaintiffs argue that a “court’s finding under the ‘unfair’ prong can be 14 based merely on conduct that ‘violates the policy or spirit of one of th[e] 15 [antitrust] laws,” and that the Court is therefore free to find Defendants liable 16 under the UCL even if Defendants are not liable under Plaintiffs’ federal antitrust 17 claims and therefore are not liable under the UCL’s “unlawful” prong. [Pls’ Reply 18 Br. in Supp. of Relief Mot. at 9:2–7 (citation omitted).] This is not correct. 19 “Where … the same conduct is alleged to support both a plaintiff’s federal 20 antitrust claims and state-law unfair competition claim [under the UCL], a finding 21 that the conduct is not an antitrust violation precludes a finding of unfair 22 competition.” LiveUniverse Inc. v MySpace, 304 Fed. App’x. 554, 557–58 (9th 23 Cir. 2008); see also Chavez, Cal. App. 4th at 375. There, the UCL claim failed 24 because the federal claim failed where both were predicated on the same 25 allegations. LiveUniverse, 304 Fed. App’x at 558. 26 395. The Court further finds that Plaintiffs waived this claim based on the 27 UCL’s unfairness prong by their previous repeated pronouncements that their UCL 28 claim asserts the same liability theory as their RPA claim and covers no additional 1 ground. [See Pls.’ Br. in Opp. to Defs.’ Mot. for Sum. J., ECF No. 200, at 25:12– 2 13; Pls.’ Post-Trial Br., ECF No. 495, at 12:21–13:1 & n. 6; Pls.’ Mot. for Perm. 3 Injunction, ECF No. 582, at 25:12–13]. 4 396. Moreover, Plaintiffs’ rely on the same factual pattern of conduct to 5 support their liability claims under the UCL’s unfairness prong as they point to on 6 their RPA claims. [See Pls’ Mot. for Perm. Injunction, ECF No. 582, at 17:10–22. 7 III. Plaintiffs Fail to Establish Entitlement to Any Relief 8 398. Plaintiffs seek injunctive relief under both Section 2(d) and the UCL. 9 399. Injunctive relief is an extraordinary remedy that is “never awarded as 10 of right” but is relief that should be carefully crafted and awarded only when 11 absolutely necessary. Winter v. NRDC, 555 U.S. 7, 24 (2008). 12 400. The plaintiff bears “the heavy burden of establishing they are entitled 13 to injunctive relief.” Blizzard Ent. Inc. v. Ceiling Fan Software, LLC, 28 F. Supp. 14 3d 1006, 1018 (C.D. Cal. 2013). A plaintiff seeking a mandatory injunction has a 15 doubly demanding burden because the relief “goes well beyond simply 16 maintaining the status quo pendente lite [and] is particularly disfavored.” Garcia 17 v. Google, Inc., 786 F.3d 733, 740 (9th Cir. 2015). Plaintiffs here seek a 18 “mandatory injunction,” which is “injunction that orders an affirmative act or 19 mandates a specified course of conduct.” Black’s Law Dictionary (11th ed. 2019), 20 “Injunction.” Mandatory injunctions should be avoided “unless the facts and law 21 clearly favor the moving party.” Id. 22 403. Although an injunction is an available remedy under the RPA, see 23 Hasbrouck v. Texaco, Inc., 842 F.2d 1034, 1042 (9th Cir. 1987), injunctive relief 24 must still be analyzed through the framework of equitable principles governing 25 equitable relief. See Ingram v. Phillips Petroleum Co., 259 F. Supp. 176, 183 26 (D.N.M. 1966) (“General equitable principles governing the granting of relief in 27 other equity cases apply to the so-called trade cases,” including an action for 28 injunction under the RPA)). 1 405. Before the Court can grant a permanent injunction, Plaintiffs must 2 meet their burden to establish four elements: (1) irreparable injury; (2) inadequate 3 legal remedies; (3) a balance of the hardships that weighs in their favor and 4 against Defendants; and (4) a public interest that a permanent injunction will not 5 disserve. Blizzard Entert. Inc. v. Ceiling Fan Software, LLC, 28 F.Supp.3d 1006, 6 1018 (C.D. Cal. 2013); eBay, Inc. v. MercExchange, LLC, 547 U.S. 388, 391 7 (2006); see also Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 156-57 8 (2010); Perfect 10 v. Google, Inc., 653 F.3d 976, 979 (9th Cir. 2011). 9 Since Plaintiffs did not prevail on either the Section 2(a) claim, the 2(d) 10 claim or the § 17200, there is no evidence that would support the issuance of a 11 permanent injunction. 12 13 14 IT IS SO ORDERED. 15 16 DATED: August 5, 2021 17

18 CONSUELO B. MARSHALL

UNITED STATES DISTRICT JUDGE

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