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Case 8:10-cv-03474-DKC Document 18 Filed 04/20/11 Page 1 of 27

IN THE UNITED STATES DISTRICT COURT


FOR THE DISTRICT OF MARYLAND

*
LOREN DATA CORP., *
*
Plaintiff, *
v. *
* Civil Action No. 10-03474 (DKC)
GXS, INC., *
*
Defendant. *
*
* * * * * * * * * * * * * * * * * * * * *

DEFENDANT'S REPLY MEMORANDUM OF LAW IN


FURTHER SUPPORT OF ITS MOTION TO DISMISS THE COMPLAINT

CHADBOURNE & PARKE LLP


Attorneys for Defendant GXS, Inc.
1200 New Hampshire Avenue, NW
Washington, D.C. 20036
(202) 974-5600 (telephone)
(202) 974-5602 (facsimile)

David H. Evans
Robert A. Schwinger

Of Counsel
Case 8:10-cv-03474-DKC Document 18 Filed 04/20/11 Page 2 of 27

TABLE OF CONTENTS

Page

PRELIMINARY STATEMENT .........................................................................................1

ARGUMENT.......................................................................................................................3

I LOREN DATA RELIES ON AN INCORRECT STATEMENT OF THE


STANDARD FOR REVIEW ON A MOTION TO DISMISS................................3

II LOREN DATA FAILS TO STATE A CLAIM UNDER SECTION ONE


OF THE SHERMAN ACT ......................................................................................6

III LOREN DATA FAILS TO STATE CLAIMS FOR MONOPOLIZATION


OR ATTEMPTED MONOPOLIZATION ............................................................10

A. GXS Is Not Compelled to Deal with Loren Data Under Aspen


Skiing..........................................................................................................10

B. Loren Data Has Failed to Allege Facts That Establish GXS Is an


"Essential Facility" To Which Loren Data Is Owed Access......................13

C. Loren Data Fails to Allege Facts That Support a Claim for


Attempted Monopolization ........................................................................17

IV LOREN DATA HAS FAILED TO ALLEGE ANTITRUST INJURY.................18

V LOREN DATA ATTEMPTS TO REFORM ITS STATE LAW CLAIMS


BUT FAILS ...........................................................................................................20

CONCLUSION..................................................................................................................21

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TABLE OF AUTHORITIES

Page(s)
CASES

Adv. Health-Care Servs., Inc. v. Radford Cmty. Hosp.,


910 F.2d 139 (4th Cir. 1990) .....................................................................................................8

America Online, Inc. v. GreatDeals.net,


49 F. Supp. 2d 851 (E.D. Va. 1999) ........................................................................................15

Ashcroft v. Iqbal,
129 S. Ct. 1937 (2009)...............................................................................................................5

Aspen Skiing Co. v. Aspen Highlands Skiing Corp.,


472 U.S. 585 (1985)...........................................................................................................10, 11

Bell Atlantic Corp. v. Twombly,


550 U.S. 544 (2007)...................................................................................................4, 5, 10, 14

Brown Shoe Co. v. United States,


370 U.S. 294 (1962).................................................................................................................22

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,


429 U.S. 477 (1977).................................................................................................................22

Conley v. Gibson,
355 U.S. 41 (1957)...............................................................................................................4, 10

Cont'l Airlines, Inc. v. United Airlines, Inc.,


277 F.3d 499 (4th Cir. 2002) ...................................................................................................15

Cont'l T.V., Inc. v. GTE Sylvania, Inc.,


433 U.S. 36 (1977).....................................................................................................................7

Dickson v. Microsoft Corp.,


309 F.3d 193 (4th Cir. 2002) .....................................................................................................4

E.I. DuPont de Nemours & Co. v. Kolon Indus.,


688 F. Supp. 2d 443 (E.D. Va. 2009) ......................................................................................11

Estate Constr. Co. v. Miller & Smith Holding Co.,


14 F.3d 213 (4th Cir. 1994) .......................................................................................................4

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Case 8:10-cv-03474-DKC Document 18 Filed 04/20/11 Page 4 of 27

Hosp. Bldg. Co. v. Trustees of Rex Hosp.,


425 U.S. 738 (1976)...................................................................................................................3

Iodice v. United States,


289 F.3d 270 (4th Cir. 2002) .....................................................................................................4

Klor's, Inc. v. Broadway-Hale Stores,


359 U.S. 207 (1959).................................................................................................................22

Laurel Sand & Gravel, Inc. v. CSX Transp., Inc.,


924 F.2d 539 (4th Cir. 1991) ...................................................................................................14

Migdal v. Rowe Price-Fleming Int'l, Inc.,


248 F.3d 321 (4th Cir. 2001) .....................................................................................................3

Mikeron, Inc. v. Exxon Co., U.S.A.,


264 F. Supp. 2d 268 (D. Md. 2003) (Chasasnow, J.)...............................................................20

Monsanto Co. v. Spray-Rite Serv. Corp.,


465 U.S. 752 (1984)...................................................................................................................7

Murrow Furniture Galleries, Inc. v. Thomasville Furniture Indus., Inc.,


889 F.2d 524 (4th Cir. 1989) .....................................................................................................4

Novell, Inc. v. Microsoft Corp.,


505 F.3d 302 (4th Cir. 2007) .............................................................................................15, 16

Sun Microsystems v. Microsoft Corp.,


333 F.3d 517 (4th Cir. 2003) ...................................................................................................17

United States v. Colgate & Co.,


250 U.S. 300 (1919)...................................................................................................................7

United States v. Microsoft Corp.,


253 F.3d 34 (D.C. Cir. 2001) ...................................................................................................16

Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP,


540 U.S. 398 (2004)...........................................................................................................10, 14

STATUTES AND RULES

15 U.S.C. § 1............................................................................................................................4, 6, 7

15 U.S.C. § 2.......................................................................................................................... passim

Fed. R. Civ. P. 12.........................................................................................................................1, 4

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Case 8:10-cv-03474-DKC Document 18 Filed 04/20/11 Page 5 of 27

IN THE UNITED STATES DISTRICT COURT


FOR THE DISTRICT OF MARYLAND

*
LOREN DATA CORP., *
*
Plaintiff, *
v. *
* Civil Action No. 10-03474 (DKC)
GXS, INC., *
*
Defendant. *
*
* * * * * * * * * * * * * * * * * * * * *

DEFENDANT'S REPLY MEMORANDUM OF LAW IN


FURTHER SUPPORT OF ITS MOTION TO DISMISS THE COMPLAINT

Defendant GXS, Inc. ("GXS" or "Defendant") respectfully submits this reply

memorandum of law in further support of its Motion to Dismiss Plaintiff's Complaint

pursuant to Rules 12(b)(6) and 12(b)(1) of the Federal Rules of Civil Procedure, in

response to plaintiff Loren Data Corp.'s ("Loren Data" or "Plaintiff") Opposition to

Defendant's Motion to Dismiss.

PRELIMINARY STATEMENT

On December 13, 2010, Loren Data filed a complaint ("Complaint" or "Compl.,"

attached as Exhibit A to the Declaration of James A. Stenger dated February 3, 2011)

against GXS alleging GXS violated the antitrust laws by refusing to deal with Loren

Data. On February 3, 2011, GXS filed a motion to dismiss the complaint for failure to

state a claim ("Motion to Dismiss"), with a supporting memorandum ("GXS Mem."). On

March 23, 2011, Loren Data filed both an opposition to GXS's Motion to Dismiss
Case 8:10-cv-03474-DKC Document 18 Filed 04/20/11 Page 6 of 27

("Opposition" or "Opp.") and a "First Amended Complaint" ("FAC," attached as

Exhibit A to the Declaration of David H. Evans dated April 20, 2011 ("Evans Decl."))

which incorporated by reference the original Complaint in its entirety and provided a

"supplemental statement of facts" with an aim to "clarify" the allegations contained in the

Complaint. (Opp. at 1.)

In the interests of judicial efficiency and economy, the parties stipulated with the

Court's approval that GXS's Motion to Dismiss and Loren Data's Opposition would be

deemed to relate to the FAC, and the existing briefing schedule would remain in place.

(Evans Decl. Exh. B.) GXS agreed to this approach because it was clear that the FAC not

only failed to remedy the deficiencies in Loren Data's original pleading but pleaded

additional facts that foreclose recovery. GXS accordingly submits this Reply and asks

that the FAC be dismissed. Moreover, as Loren Data has availed itself of the opportunity

to amend its complaint in light of GXS's Motion to Dismiss, it is clear that allowing

further repleading to cure the FAC's fatal infirmities would be futile. Loren Data's claims

should therefore be dismissed with prejudice.

Dismissal is warranted because the FAC not only fails to state a claim but goes

further to allege affirmatively facts that controvert the central bases of Loren Data's

claims. Loren Data charges that GXS has refused to deal with it, but has attached to the

FAC a letter from GXS that contains an offer to deal. Loren Data complains that being

charged at all for access to GXS's system is an antitrust violation that will drive Loren

Data from business but admits that its existing $3500 per month transit agreement with

GXS is adequate to permit Loren Data to do business. Loren Data complains that GXS's

2
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customers are an "essential facility," but pleads that there are innumerable other sources

for access to the very same facility, and indeed that Loren Data itself was able to

circumvent and access GXS's network notwithstanding the supposed denial of access.

Loren Data complains of some purported industry-wide conspiracy to refuse to deal with

Loren Data yet pleads that everyone in the industry, including GXS, is dealing with it.

Loren Data claims that it is a significant competitor whose departure from the market

would harm the "U.S. economy," but concedes in its own pleading that it has only 0.15 to

0.90 percent of the "market" and that its customers could turn to 36 entities other than

GXS for supply.

This is not an antitrust case. It is not even a contract case. Loren Data is simply

misusing the processes of this Court in the hopes of gaining an advantage in an upcoming

commercial negotiation with GXS over the terms of their relationship. Loren Data's

attempt should be rejected and its case dismissed.

ARGUMENT

LOREN DATA RELIES ON AN INCORRECT STATEMENT OF


THE STANDARD FOR REVIEW ON A MOTION TO DISMISS

Citing Migdal v. Rowe Price-Fleming Int'l, Inc., 248 F.3d 321, 325 (4th Cir.

2001), Loren Data states that the Court "must accept . . . 'all well-pleaded allegations'" in

the complaint as true "unless it appears certain that the plaintiff cannot prove any set of

facts in support of his claim." (Opp. at 1.) Citing Hosp. Bldg. Co. v. Trustees of Rex

Hosp., 425 U.S. 738, 746 (1976), Loren Data further states that the complaint should not

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be dismissed "unless it appears beyond a doubt that [the] plaintiff can prove no set of

facts in support of its claim." (Opp. at 1 (internal quotations omitted).) And Loren Data

states that in "antitrust cases, where the proof is largely in the hands of the alleged

conspirators, dismissals prior to giving the plaintiff amply opportunity for discovery

should be granted very sparingly," citing Murrow Furniture Galleries, Inc. v. Thomasville

Furniture Indus., Inc., 889 F.2d 524, 529 (4th Cir. 1989). (Opp. at 1 (internal quotations

omitted).)

Loren Data's reliance on these dated precedents is astonishing. These cases are all

based on the old "no set of facts" standard for Rule 12(b)(6) motions from Conley v.

Gibson, 355 U.S. 41, 45-46 (1957). This standard was expressly repudiated by the

United States Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563

(2007) ("The phrase ['no set of facts'] is best forgotten as an incomplete, negative gloss

on an accepted pleading standard . . . ."). It is no longer the law.1

1
Loren Data also failed to articulate properly the correct standard in this Circuit for
Rule 12(b)(6) motions even pre-Twombly. The Fourth Circuit held pre-Twombly
that an antitrust plaintiff must meet the "basic pleading requirement that a plaintiff set
forth facts sufficient to allege each element of his claim." Dickson v. Microsoft
Corp., 309 F.3d 193, 212-13 (4th Cir. 2002); accord Estate Constr. Co. v. Miller &
Smith Holding Co., 14 F.3d 213, 220-22 (4th Cir. 1994) (holding in Section 1 case
that plaintiff must plead sufficient facts to support each element of the antitrust
violation); see generally Iodice v. United States, 289 F.3d 270, 281 (4th Cir. 2002)
(dismissing negligence claims, stating "[d]ismissal of a complaint for failure to state
facts supporting each of the elements of a claim is, of course, proper").

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Twombly and the Supreme Court's follow-up decision in Ashcroft v. Iqbal, 129

S. Ct. 1937, 1949 (2009), stand for the propositions that discovery should not be imposed

lightly on antitrust defendants, that plaintiffs must articulate plausible causes of action

and not merely recite legal conclusions, and that courts can and should end baseless, ill-

pleaded lawsuits in their incipiency. Twombly, 550 U.S. at 555; Iqbal, 129 S. Ct. at

1949. To survive dismissal, a complaint now must plead "enough facts to state a claim to

relief that is plausible on its face." Twombly, 550 U.S. at 570. If the allegations in the

complaint cannot raise a claim of entitlement to relief, that "basic deficiency should . . .

be exposed at the point of minimum expenditure of time and money by the parties and the

court." Id. at 558 (internal quotations omitted). A plaintiff cannot rely upon "formulaic

recitation of the elements of a cause of action" or "naked assertion[s] devoid of further

factual enhancement" in order to state a claim. Iqbal, 129 S. Ct. at 1949 (internal

quotations omitted). (See GXS Mem. at 15-17.)

Loren Data claims throughout its Opposition that, were it to have discovery, it

would surely find some alleged wrongdoing, and that its claims therefore should not be

dismissed. (See, e.g., Opp. at 5 ("[u]nder the 'rule of reason' test the conduct of the

Defendant would be measured against extensive analysis through discovery").) Loren

Data is mistaken. Loren Data cannot simply announce broad, conclusory and

unsupported allegations, and be allowed to impose the tremendous cost of discovery on a

defendant in the hope of discovering some set of facts that might support those

allegations. Rather, it must articulate plausible causes of action based on plausible

factual allegations. It has failed to do so.

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II

LOREN DATA FAILS TO STATE A CLAIM


UNDER SECTION ONE OF THE SHERMAN ACT

Loren Data pleads that "GXS has denied interconnects to Loren Data while it

combined with all other VANs at scale to allow this facility" and that GXS has therefore

"created and maintained a boycott of Loren Data in violation of §1 of the Sherman Act."

(FAC ¶ 9.) Loren Data characterizes this state of affairs as an "agreement," a "group

boycott" and a "per se violation" of the Sherman Act. (Opp. at 2.) Loren Data also

claims that this "group boycott" violated the Sherman Act under the rule of reason. (Opp.

at 5.)

To begin with, what Loren Data has described is not a "boycott." It is not even an

agreement. It is just an act of a single firm. Indeed, Loren Data pleads facts showing just

the opposite of a group boycott. It alleges that other VANs dealt with Loren Data on the

very terms that Loren Data was seeking: "Loren Data has been granted Interconnects

with every other VAN." (Compl. ¶ 6.)

In addition, the supposed "boycott" Loren Data has alleged is not plausible.

Loren Data's original Complaint did not set forth any allegations that might explain why

GXS would enter into a conspiracy whereby GXS alone would refuse to deal with Loren

Data while all of the other "co-conspirators" would continue to deal with Loren Data.

(See GXS Mem. at 19-20.) Neither the FAC nor the Opposition provide any further facts

that might make sense of this nonsensical allegation.

Loren Data's original Complaint also failed to provide any of the specific details

of the time, place or people involved in the alleged conspiracy. Neither the FAC nor the

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Opposition provides any further facts to correct these omissions. Loren Data had the

opportunity to set forth these supporting facts in its FAC but failed to do so. This failure

is fatal to its claims whether those claims are deemed per se or governed by the rule of

reason.

The Opposition goes to great lengths to cite various cases that held horizontal

group boycotts to be per se illegal. In all of these cases, however, there was an actual

agreement. It is simply not a violation of Section One to decide unilaterally not to deal

with a potential business partner. Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752,

761 (1984); United States v. Colgate & Co., 250 U.S. 300, 307 (1919). And Loren Data

has failed to allege even that. Rather, Loren Data has pleaded facts (and attached to its

FAC an actual offer from GXS) that indicate that GXS has in fact offered to deal with

Loren Data. (GXS Mem. at 23-24; FAC ¶ 7 & Exh. A (GXS letter offering to deal with

Loren Data).)

Loren Data also summarily asserts that the alleged refusal to deal violates the

Sherman Act under the rule of reason. Rule of reason analyses balance the

procompetitive benefits of an activity against the anticompetitive harms. Cont'l T.V., Inc.

v. GTE Sylvania, Inc., 433 U.S. 36, 49-50 & n.15 (1977). Rather than articulate any set

of facts that would demonstrate a rule of reason violation, all Loren Data can offer is the

grudging dodge that if it "must follow rule of reason proof it is certainly prepared to do

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so." (Opp. at 5.) The amendment of a complaint in the face of a motion to dismiss

certainly would have been the time to do just that.2

To state a claim under the rule of reason, a plaintiff must allege, among other

things, a relevant geographic and product market as well as harm to competition. Adv.

Health-Care Servs., Inc. v. Radford Cmty. Hosp., 910 F.2d 139, 144 (4th Cir. 1990). In

an attempt to "supplement" and "clarify" its deficient product and geographic market

allegations, Loren Data's FAC offers a section on unspecified "markets." (FAC ¶¶ 1-6.)

That section, however, does not actually state what the relevant product or geographic

market is. All Loren Data needed to do was provide a single sentence in its FAC alleging

the product and geographic market. Instead, it offers a host of new contradictory

assertions.3

In FAC ¶ III(d), for example, Loren Data states "Loren Data's market for EDI

transmission is primarily between trading partners in North America." But it then says

"[a] modest amount of its business was in the United Kingdom through GXS's Tradanet"

and "GXS' business in the United States encompasses 50% of its total worldwide

2
Moreover, the standard that Loren Data articulates in this regard is the standard for a
per se violation, not a rule of reason violation. (See Opp. at 5 ("Under the per se rule
. . . ."). Its only attempt at articulating supporting facts in this regard is to offer a
legal conclusion. Id. (alleging GXS is "monopolist" or, if not, the "dominant
player"). (See GXS Mem. at 37-38.)
3
By incorporating all of the Complaint's allegations by reference into the FAC, Loren
Data has preserved the ambiguity of the Complaint. (See GXS Mem. at 32-37.)

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business." Id. FAC ¶ III(m) refers to an "EDI market" and then concludes GXS must

control 55 percent of the market because "about 55% of Loren Data's business travels on

GXS VANs," even though Loren Data makes no allegation that might provide a reason to

believe that the share of its business that is GXS-related reflects the breakdown for the

industry as a whole. Indeed, if Loren Data is merely a GXS reseller, one would expect

the contrary.

Loren Data's legal argument also fails to acknowledge the antitrust decisions

finding that competition can exist in the form of alternative technologies (see GXS Mem.

at 33-35), and Loren Data's latest pleading continues to omit any allegations as to this

point. Thus, far from providing certainty and clarity, the FAC's silence only further

confuses the issue. Is the relevant geographic market claimed to be North America?

Worldwide? Is it just the EDI technology? What about other technologies like "AS2,"

which was identified as a competitor to EDI by the British government? (See GXS Mem.

at 11 n.7.)

Loren Data has had the benefit of knowing the issues GXS was raising about its

relevant market definition, and has availed itself of the opportunity to replead and

therefore fix these problems. Since it has failed to fix them, much less in any plausible

way, it seems improbable that Loren Data has any new facts it could cite upon further

repleading that would cure this basic problem. The Court should dismiss Loren Data's

claims with prejudice.

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III

LOREN DATA FAILS TO STATE CLAIMS FOR


MONOPOLIZATION OR ATTEMPTED MONOPOLIZATION

A. GXS Is Not Compelled to Deal with Loren Data Under Aspen Skiing

Citing Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985)

("Aspen Skiing"), Loren Data claims that GXS has but a "limited" right to do business

with whomever it wishes. The law is quite the contrary: competitors have only a very

limited right to compel access to another's infrastructure, because anything less would

significantly chill innovation and investment. See Verizon Commc'ns Inc. v. Law

Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407-08 (2004) ("Trinko").

Aspen Skiing involved a defendant monopolist who terminated a contract with its

only competitor after a profitable, long-term course of dealing. The competitor offered to

deal with the monopolist at any price, including purchasing the service at commercial

rates, but the monopolist refused. The lower court dismissed the complaint for failure to

state a claim. The Supreme Court reversed because it was conceivable that the plaintiff

could prove some set of facts in support of its claim. Aspen Skiing, 472 U.S. at 610-11.

Aspen Skiing was decided in 1985, before Twombly, and under the now-

repudiated "no set of facts" standard of Conley. Aspen Skiing therefore cannot stand for

the proposition that such a refusal to deal states sufficiently plausible harm to allow

litigation and discovery to go forward under the standards of Twombly. Nonetheless,

even if Aspen Skiing were still valid, it is inapposite. Loren Data pleads that there are 37

VANs (FAC ¶ 3), which means that GXS is hardly the only competitor to which its

customers can turn. Indeed, if GXS represents 50 percent of a "market" and Loren Data

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represents between 0.15 and 0.90 percent, by its own admissions, Loren Data's customers

can turn to alternative suppliers representing about 50 percent of the market.

In addition, Loren Data has not alleged a refusal by GXS to deal at any price.

Rather, unlike the defendant in Aspen Skiing, GXS has offered to deal with Loren Data

and is currently dealing with Loren Data. (See FAC ¶ 7 & Exh. A; GXS Mem. at 23-

25.) Indeed, GXS is currently dealing with Loren Data at a rate Loren Data deems is

sufficient to compete (see Opp. at 13 (suggesting that Loren Data's transit agreement with

Inovis (to which GXS succeeded) at $3500/month is reasonable)), even though dealing

with Loren Data has hardly been profitable or without issue for GXS (see FAC Exh. A;

GXS Mem. Point at 26-27).

GXS had earlier cited cases in support of the notion that refusing to deal with a

free rider is a legitimate business reason. (See GXS Mem. at 22.) Loren Data takes

exception to being characterized as a free rider, asserting that it is "currently paying for

data transit" (Opp. at 9), and that those payments are reasonable (Opp. at 13). Loren Data

also takes exception to the free rider caselaw GXS cited, contending that an

interconnection can benefit both parties. (Opp. at 10.) Such an allegation, however, fails

to make out the elements of the Section Two claim. Rather, Loren Data must allege that

GXS has no legitimate business reason for refusing to deal with Loren Data. See E.I.

DuPont de Nemours & Co. v. Kolon Indus., 688 F. Supp. 2d 443, 456 (E.D. Va. 2009).

But since Loren Data itself has alleged facts that show that GXS has many legitimate

reasons for not wanting to deal with Loren Data, it has failed to allege facts plausibly

showing that any alleged "refusal to deal" on GXS's part is solely in pursuit of dreams of

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monopoly. Simply because an interconnect allegedly can offer benefits does not mean an

interconnect with Loren Data will confer those benefits. Loren Data has not offered any

facts to support that implication, only conclusory protests. Loren Data's Section Two

claims are thus implausible and should be dismissed.

Lastly, Loren Data states that it pleaded several past refusals to deal in addition to

the "anticipated refusal likely to occur in the future," and argues that this somehow

salvages its claim. (Opp. at 13.) For example, Loren Data cites a "refusal" to continue an

interconnect in the United Kingdom. Id. But at the same time Loren Data pleads that "95

percent" of its business is in North America and that it has continued access to GXS's

other VANs. (See GXS Mem. 23-24.) This is no refusal to deal, and even if it were, the

refusal would not affect Loren Data's business in any meaningful way because 95 percent

of its revenues allegedly come from the North America.

Loren Data argues in its Opposition that ¶ 9 of the Complaint alleges that GXS

has expressed its intention to "nullify" Loren Data's peer interconnects with IE and

InovisWorks (Opp. at 13), but that is not what the pleading actually says. Loren Data's

allegations plead only that that GXS has expressed an intent to negotiate that contract.

(GXS Mem. at 24-25.) Indeed, Loren Data has attached to its FAC an offer from GXS to

deal with Loren Data on commercial terms. (FAC Exh. A.) Lastly, Loren Data claims

that an offer to deal at $13,000 constitutes a constructive refusal to deal because GXS's

predecessor Inovis offered the similar deal at $3500, terms that Loren Data now alleges

are reasonable. The Inovis transit agreement is currently in place with GXS, as Loren

Data admits. Loren Data therefore admits that paying at least $3500 a month is

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reasonable and that it can function competitively paying that amount. (See Opp. at 13.)

Such admissions therefore completely undermine any argument Loren Data could make

that having to pay a commercial rate for access to GXS's network (i.e., as opposed to

getting free access) is unreasonable.

In any event, Loren Data admits that these alleged refusals to deal occurred before

GXS allegedly became "dominant." (FAC ¶ III(f) ("Beginning as GEIS . . . with 25% of

the market in 2001, GXS has become the largest and dominant player in the industry by

the infusion of venture capital and the acquisition of other major players such as . . .

Inovis [in 2010]."); Opp. at 16 (Loren Data did not seek a judicial remedy a decade ago

because it wasn't necessary).) Given the differing market conditions that Loren Data

alleges between then and now, those past refusals cannot be the basis of an antitrust claim

against GXS today based upon an allegedly dominant market position.

B. Loren Data Has Failed to Allege Facts That Establish GXS Is


an "Essential Facility" To Which Loren Data Is Owed Access

Loren Data argues that it has stated sufficient facts to demonstrate a violation of

Section Two of the Sherman Act under the "essential facilities" doctrine. It discounts the

doctrine's questionable validity, states that a facility need only be "significant" to be

"essential" (Opp. at 15), and claims without any supporting facts that GXS has

"monopoly power" and has erected "barriers to entry" in the "EDI industry" (Opp. at 18-

19). None of these contentions salvages Loren Data's claim.

Loren Data argues that the essential facilities doctrine is still "a valid legal

argument under § 2" (Opp. at 13-14), and that GXS did not fairly discuss the Supreme

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Court's most recent views on the doctrine, citing a passage from Trinko, 540 U.S. at 411,

that Loren Data believes supports its argument that the essential facilities doctrine is still

vital. But the passage from Trinko which Loren Data cites establishes quite clearly that

the theory is no longer vital and in any event is not applicable in this case.

Trinko discusses the essential facilities doctrine immediately after holding that an

incumbent network monopolist that provides some, but not best, access to its network to

its competitors does not violate the antitrust laws at all. Id. at 409-11. The Court

disposes of any potential "essential facilities" argument by noting that, if such a claim

exists, it is indispensible to argue that access is completely unavailable. Id. at 411. If

there is at least some degree of access, as there was in Trinko, the doctrine is unavailable.

Id. The Court thus actually never endorsed the "essential facilities" doctrine. Indeed, it

was quite dismissive. The Court noted that, were the doctrine to exist, it would not be

applicable under Trinko's facts in any event. Id.

What is undeniable in Trinko is that an incumbent monopolist gave terrible, and

certainly "less than ideal" (FAC ¶ 7), access to its network to a competitor, under a

regime that explicitly recognized the applicability of the antitrust laws, and yet the Court

still found no antitrust liability. This decision forecloses recovery under the antitrust laws

for anything Loren Data has alleged and certainly calls into question the continued

viability of "essential facilities" precedents like Laurel Sand & Gravel, Inc. v. CSX

Transp., Inc., 924 F.2d 539, 544 (4th Cir. 1991), which was decided 13 years before

Trinko and 16 years before Twombly.

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Loren Data makes several other arguments about why access to GXS's customers

is an essential facility, but these fail as well. Loren Data asserts that an essential facilities

claim can exist when denial of access to these customers has a "significant" impact on the

market (Opp. at 15), but that is not the legal standard. Rather, access must be "vital."

(GXS Mem. at 28-32; Opp. at 15 (citing America Online, Inc. v. GreatDeals.net, 49 F.

Supp. 2d 851, 862 (E.D. Va. 1999) ("An 'essential facility' is one that is not merely

helpful but vital . . . .")). But since Loren Data concedes in its FAC that 55 percent of its

revenues are attributable to traffic going to GXS customers, it has therefore pleaded that

it can continue to serve about half of its customers without any access to GXS.

Notwithstanding Loren Data's hyperbolic, conclusory protestations that it could not

survive under such circumstances (see Opp. at 11; FAC ¶ III(m)), Loren Data has alleged

facts that show access to GXS is not necessary even for it to compete.

Loren Data must allege that Loren Data's loss of access to GXS would have a

significant effect on competition. Cont'l Airlines, Inc. v. United Airlines, Inc., 277 F.3d

499, 515-16 (4th Cir. 2002). But Loren Data has pleaded that its customers represent

only between 0.15 percent and 0.90 percent of the undefined "market" and can turn to at

least 36 VANs other than GXS to get that same access.

Citing Novell, Inc. v. Microsoft Corp., 505 F.3d 302 (4th Cir. 2007), Loren Data

argues that providing inferior access to a facility can support a claim under Section Two.

(Opp. at 19.) Novell involved allegations that Microsoft manipulated its Windows

operating system platform to hinder the success of Novell's WordPerfect suite of office

applications. Novell, Inc., 505 F.3d at 316-17. The purpose was to benefit Microsoft's

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competing Word suite of applications. Loren Data, though, doesn't sell applications that

compete with GXS applications for use on GXS's network. Loren Data is, at most, a

competing network. (See FAC ¶¶ 14, III(j) & Exh. A.) Loren Data wants free and

perfect access to GXS so that it can resell GXS's network without having to make any

investment itself. In essence, Loren Data thinks Novell entitles it to the "source code" to

Windows, for free, so that it can sell Windows clones. It is incorrect.

Moreover, in 2007, when Novell was decided, a court had found that Microsoft

was a monopolist, and Microsoft had admitted that it was a monopolist. See United

States v. Microsoft Corp., 253 F.3d 34, 54-56 (D.C. Cir. 2001). It was certainly plausible

to allege that Microsoft was in fact a monopolist. In addition, Novell's WordPerfect

applications were the leading competitor to Microsoft's Word suite of programs, and

Novell could have created or sponsored a meaningful threat to the Windows operating

system. Novell, Inc., 505 F.3d at 318-19. Here, by contrast, even though Loren Data has

operated for over 20 years (FAC ¶ III(m)), Loren Data, by its own admission, only has

between 0.15 and 0.90 percent market share, and there are at least 36 VANs other than

GXS to which its customers could turn for the same service they would receive from

GXS or Loren Data. These factual allegations foreclose Loren Data from plausibly

alleging that GXS is a monopolist or that Loren Data is on the cusp of revolutionizing a

"market," particularly a supposed "EDI market" the basis of which is a 30 year old open-

source communications standard. Cf. Novell, Inc., 505 F.3d at 318-19. In short, Loren

Data's attempted Novell analogy is greatly misplaced.

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It is fairly transparent that what Loren Data is seeking is free access to a network

it invested nothing to build, to which it claims entitlement based on its self-serving

assertion that this is for the "good of the industry and to benefit of the consumer." (Opp.

at 18.) Indeed, since Loren Data claims to be a "scale" competitor (Compl. ¶ 15), it

already has the infrastructure to serve large numbers of customers. Rather than compete

for those customers, however, it wants simply to take them while compensating GXS

nothing. Nothing in Section Two provides for such an outcome.

C. Loren Data Fails to Allege Facts That Support


a Claim for Attempted Monopolization

Loren Data argues that it has stated a cognizable claim for attempted

monopolization. Such an attempt under Section Two requires, among others, a

dangerous probability of success. Sun Microsystems v. Microsoft Corp., 333 F.3d 517,

534 (4th Cir. 2003). Loren Data complains that GXS's acquisitions of IBM in 2005 and

Inovis in 2010 show a "dangerous probability of success" (Opp. at 21-22), but those

acquisitions received regulatory approval and are now complete. GXS has already has

accrued whatever marginal "market power" such acquisitions may have conferred. Loren

Data calls this a "flawed assumption," and suggests that GXS will continue to grow via

acquisitions. (Opp. at 21.) But Loren Data offers no factual support for its speculative

suggestion that GXS will continue to gain market share through acquisitions. It certainly

does not allege any planned future acquisitions that will confer market power.

What Loren Data really appears to be arguing is that if "GXS were to terminate

Loren Data's connections to its network, it would be one step closer to eliminating

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competition from Loren Data, and similar businesses, in the marketplace." (Opp. at 21

(emphasis added).) Notably, Loren Data fails to identify any such "similar businesses"

supposedly at risk. Indeed, the only "refusal to deal" it has alleged is that GXS may

terminate its connections to Loren Data, while conceding that every other VAN in the

industry has interconnects. Combined with at most a market share of 0.90 percent, the

existence of 36 other VANs and the fact that Loren Data derives 45 percent of its

revenues from entities other than GXS, the allegation that the termination of Loren Data

will suddenly tip GXS into monopoly is implausible. Loren Data cites no law in support

of its "one step closer" standard, because that simply is not the law.

IV

LOREN DATA HAS FAILED TO ALLEGE ANTITRUST INJURY

Loren Data also argues that it has alleged antitrust injury and that its departure

from the market would harm competition. Loren Data takes exception with the estimate

that only 0.2 percent of GXS customers communicate with Loren Data, arguing that the

GXS is pointing to figures in Loren Data's complaint that are out of date. (Opp. at 23-

24.) But Loren Data's own allegations, even with the FAC, belie its argument.

Loren Data concedes that its share of the "EDI industry" is "rather modest."

(FAC ¶ 4.) This can politely be termed an understatement. Loren Data pleads as to its

size that it "estimates its trading partner relationships to be as high as 54,000 with 18,000

originating on the Loren Data end." Id. (See also FAC ¶ III(e) ("45,000 trading

partners").) Loren Data alleges that GXS has "6 million trading partner relationships."

(FAC ¶ 5.) If GXS "exerts control over 50% or more of the EDI communications

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Case 8:10-cv-03474-DKC Document 18 Filed 04/20/11 Page 23 of 27

market" as Loren Data alleges (Compl. ¶ 5), the total "market" would be about 12 million

trading partners. At that market size, Loren Data's 54,000 trading partners would

represent an approximately 0.45 percent market share. At 18,000 trading partners, Loren

Data would have a market share of approximately 0.15 percent. If the total market were

about 6 million trading partners, at 54,000 trading partners, then Loren Data would have

a market share of 0.90 percent, and the 18,000 originating on the Loren Data end would

represent a market share of 0.30 percent.

Elsewhere, Loren Data offers other figures. It states that 15,000 customers would

be affected in the relevant market, and that GXS, which allegedly has about 50 percent of

the supposed market, has 3 million customers. (Opp. at 26.) Loren Data would then not

have 0.90 percent of the market, but rather only 0.25 percent of the market. Whichever

of these conflicting figures is correct, as a matter of law, trivial market shares of this kind

are incapable of affecting a relevant market, let alone the entire "U.S. economy." (See

Opp. at 24.)

In its original Complaint, Loren Data alleged that there were at least seven other

VANs with interconnects to GXS. (Compl. ¶ 20.) Loren Data now alleges in its FAC

that there in fact are over "37 VANs" in this industry. (FAC ¶ 3.) Given how many other

VANs Loren Data's customers can turn to in order to get access to GXS's supposed

essential facility (FAC ¶ 3), it is implausible that any of Loren Data's customers would

suffer any injury from Loren Data's complete departure from whatever market Loren

Data might be pleading. In short, Loren Data pleads no antitrust injury and no harm to

competition.

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Case 8:10-cv-03474-DKC Document 18 Filed 04/20/11 Page 24 of 27

LOREN DATA ATTEMPTS TO REFORM


ITS STATE LAW CLAIMS BUT FAILS

Loren Data claims that it has stated a cause of action under Maryland antitrust law

because GXS supposedly "made [its] service available . . . at a discriminatory cost of

approximately $30,000.00 per month or more . . . as opposed to no charge for all others."

(Opp. at 27.) However, Loren Data never purchased the service at that price. (Compl

¶ 16.) There was therefore no sale and therefore no price discrimination. See Mikeron,

Inc. v. Exxon Co., U.S.A., 264 F. Supp. 2d 268, 275 (D. Md. 2003) (Chasanow, J.).

Also, as discussed in Point IV above, Loren Data has pleaded facts to demonstrate

that its total departure from the market would not affect competition. It fails to establish

the requisite harm to competition. The Maryland antitrust claims fail on this ground as

well. (See GXS Mem. at 43-46.)

Paradoxically, Loren Data argues that the commercial mailbox it was offered is

sufficiently similar, if not identical, to an interconnect to sustain a price discrimination

claim—but then argues that this same commercial mailbox is sufficiently dissimilar to an

interconnect to sustain a refusal to deal claim. This allegation alone renders implausible

its assertion that a commercial mailbox is an inadequate technical substitute for an

interconnect.

In any event, whatever the merits of Loren Data's Maryland law claims, each of

them fails jurisdictionally if the Sherman Act claims are dismissed. (See GXS Mem. at

43-44.)

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CONCLUSION

Loren Data has attached to its FAC a letter from GXS offering to deal with it.

(FAC Exh. A.) Loren Data admits that it currently has access to GXS, that it can function

competitively with a commercial mailbox. (GXS Mem. at 23-26.) Loren Data admits

that it can circumvent an interconnect to gain the very connection it claims is essential.

(GXS Mem. at 30-32.) And while nothing requires GXS to deal with Loren Data at all,

GXS has done so. Therefore, Loren Data's monopolization claims all fail.

Loren Data fails to identify any other VAN that has refused to deal with it. Loren

Data fails to identify any of the facts that would show an agreement not to deal. Loren

Data fails to identify a cogent, let alone plausible, relevant product or geographic market.

Loren Data has failed to allege facts that would show any harm to competition. In fact,

Loren Data admits that it has interconnects with the vast majority, if not all, of the other

36 VANs in the market. (Compl. ¶ 6.) GXS's Motion to Dismiss identified each of these

infirmities with the claims Loren Data was attempting to plead. Nonetheless, Loren Data

filed an amended complaint that failed to fix any of them.

Having pleaded facts that suggest that it has between 0.15 percent and 0.90

percent of some purported market, that it has 15,000 customers out of a market of at least

six million (Opp. at 26), and that there are 36 providers other than GXS to which Loren

Data's few customers can turn for the very access it claims is essential to compete (FAC

¶ 3), Loren Data has pleaded facts that entirely foreclose any plausible allegation that a

complete exit from the market by Loren Data would even affect competition, let alone

impede it.

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Loren Data cites Klor's, Inc. v. Broadway-Hale Stores, 359 U.S. 207, 213 (1959),

a case from more than 50 years ago, to argue that the antitrust laws were indeed designed

to protect a single competitor. (Opp. at 4, 26.) Klor's, though, merely stands for the

proposition that the antitrust laws apply to private agreements. Starting with Brown Shoe

Co. v. United States, 370 U.S. 294, 344 (1962), and continuing on consistently through

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977), and since, the

Supreme Court has reaffirmed that the antitrust laws were not designed to protect

individual competitors like Loren Data, but only the process of competition itself.

Loren Data's complaint is not about competition or preserving the "free enterprise

system." (See Opp. at 2.) It's not about a company whose departure would have a

"hugely detrimental impact, not only on the EDI industry, but on the U.S. economy as

well." (See Opp. at 24.) It's about Loren Data trying to get free access to a product it

would like to resell at a profit, and attempting to use litigation to gain an advantage in an

upcoming commercial negotiation.

Now that Loren Data has availed itself of the opportunity to amend its complaint

in light of the Motion to Dismiss, it not only has failed to ameliorate its pleading's

deficiencies but in fact has established even more clearly that further amendments would

be futile. This Court should therefore grant the Motion to Dismiss with prejudice, and

without granting any further leave to replead.

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Dated: Washington, D.C.


April 20, 2011
Respectfully submitted,

CHADBOURNE & PARKE LLP

By /s/
David H. Evans (Bar No. 18090)
A Member of the Firm
Attorneys for Defendant GXS, Inc.
1200 New Hampshire Avenue, NW
Washington, D.C. 20036
(202) 974-5600 (telephone)
(202) 974-5602 (facsimile)
devans@chadbourne.com

David H. Evans
Robert A. Schwinger

Of Counsel

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