Riley v. Information Systems Audit and Control Association Inc.

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

LEIGH RILEY, GERARD DACHE, and )

HENRY SCHNEIDER, )

)

Plaintiffs, ) No. 22 C 4465

) No. 22 C 4644

v. ) No. 22 C 5566

)

INFORMATION SYSTEMS AUDIT AND

) Judge Virginia M. Kendall

CONTROL ASSOCIATION, INC.,

)

)

Defendant.

)

MEMORANDUM OPINION AND ORDER

Information Systems Audit and Control Association, Inc. (“ISACA”) controls and operates

the Capability Maturity Model Integration (“CMMI Model”), a “best practices” model developed

by Carnegie Mellon University and the Software Engineering Institute to assess a company’s

“CMMI Maturity Level Rating.” (Dkt. 45, No. 22 C 4465, ¶¶ 1, 8, 10). ISACA sells an appraisal

service using the CMMI Model to companies and government agencies. (Id. ¶¶ 8, 10–11).

Organizations often consider a company’s CMMI Maturity Level Rating in deciding whether to

employ an entity. (Id. ¶¶ 93–94). ISACA itself does not, however, actually conduct the appraisal

directly; rather, third-party “Certified Lead Appraisers” (“CLA”) run the CMMI Model appraisals,

and ISACA vets the work for compliance with its standards before accepting the results. (Dkt. 45-

7).

The three plaintiffs here—Leigh Riley, Gerard Dache, and Henry Schneider—were CLAs.

(Id. ¶¶ 1–2; Dkt. 6, 22 C 4644, ¶¶ 1–2; Dkt. 6, 22 C 5566, ¶¶ 1–2). After ISACA terminated its

contracts with each plaintiff, they initiated separate lawsuits with nearly identical claims alleging

antitrust violations under Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act,

as well as unjust enrichment. (See generally Dkt. 45, No. 22 C 4465; Dkt. 6, 22 C 4644; Dkt. 6,

22 C 5566). ISACA moved to dismiss each complaint for failure to state a claim. (Dkt. 48, No. 22

C 4465; Dkt. 23, No. 22 C 4644; Dkt. 23, No. 22 C 5566); Fed. R. Civ. P. 12(b)(6). The Clerk of

the Court consolidated the three cases before this Court. All three motions will be considered

together.

Under Federal Rule of Civil Procedure 12(b)(6), “a plaintiff must allege ‘enough facts to

state a claim that is plausible on its face.’” Allen v. Brown Advisory, LLC, 41 F.4th 843, 850 (7th

Cir. 2022) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). When considering a

motion to dismiss, courts “accept the allegations in the complaint as true, and draw all reasonable

inferences in favor of the plaintiff.” Crescent Plaza Hotel Owner, L.P. v. Zurich Am. Ins. Co., 20

F.4th 303, 307 (7th Cir. 2021) (cleaned up). “A claim has facial plausibility when the plaintiff

pleads factual content that allows the court to draw the reasonable inference that the defendant is

liable for the misconduct alleged.” Allen, 41 F.4th at 850 (quoting Ashcroft v. Iqbal, 566 U.S. 662,

678 (2009)). At the same time, “[t]hreadbare recitals of the elements of a cause of action, supported

by mere conclusory statements” are not enough. Oakland Police & Fire Ret. Sys. v. Mayer Brown,

LLP, 861 F.3d 644, 649 (7th Cir. 2017) (quoting Iqbal, 556 U.S. at 678).

It bears emphasis that the Supreme Court first signaled a change for evaluating 12(b)(6)

motions in an antitrust case, Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557 (2007). One reason

for the shift was straightforward: litigation is costly, both financially and for the court system.

“[W]hen the allegations in a complaint, however true, could not raise a claim of entitlement to

relief, this basic deficiency should ... be exposed at the point of minimum expenditure of time and

money by the parties and the court.” Id. at 558 (quoting 5 Charles Wright & Arthur Miller, Federal

Practice & Procedure § 1216 (3d ed. 2004))) (cleaned up). This concern is particularly worrisome

for antitrust law. Antitrust discovery—and litigation generally—proves expensive. See id. at 558.

As such, “the costs of [] federal antitrust litigation and the increasing caseload of the federal courts

counsel against sending the parties into discovery when there is no reasonable likelihood that the

plaintiffs can construct a claim from the events related in the complaint.” Car Carriers, Inc. v.

Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984). Courts, then, must “insist upon” specificity

and clarity in antitrust pleadings. Twombly, 550 U.S. at 558; see also Ass’n of Am. Physicians &

Surgeons, Inc. v. Am. Bd. of Medical Specialties, 15 F.4th 831, 835 (7th Cir. 2021) (“Twombly

bars the discover-first, plead-later approach …”). The complaints here are deficient in both areas.

ISACA offers several reasons why the collective antitrust claims should be dismissed—

mainly, the plaintiffs lack antitrust standing and antitrust injury, and the complaint fails to allege

any of the necessary elements for violations of the Sherman and Clayton Acts. (See generally Dkt.

50, No. 22 C 4465). The Court focuses on only one fatal defect common to each antitrust count:

the failure to allege a relevant product market.

Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act require the plaintiff

to plead a relevant product market (along with a relevant geographic market) where the alleged

antitrust behavior occurred in. See, e.g., Viamedia, Inc. v. Comcast Corp., 951 F.3d 429, 451 (7th

Cir. 2020) (Section 2); Paramount Media Group, Inc. v. Village of Bellwood, 929 F.3d 914, 921

(7th Cir. 2019) (Section 1); Federal Trade Comm’n v. Advocate Health Care Network, 841 F.3d

460, 467 (7th Cir. 2016) (Section 7). A relevant product market encompasses “products that have

reasonable interchangeability for the purposes for which they are produced—price, use and

qualities considered.” United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 404 (1956);

see also Sharif Pharmacy, Inc. v. Prime Therapeutics, LLC, 950 F.3d 911, 918 (7th Cir. 2020).

“[A] manufacturer’s own products do not [generally] comprise a relevant product market,” nor

does a company’s natural monopoly over its own products. Green Country Food Market, Inc. v.

Bottling Grp., LLC, 371 F.3d 1275, 1282 (10th Cir. 2004); see also E.I. du Pont, 351 U.S. at 393

(“[The] power that … automobile or soft-drink manufacturers have over their trademarked

products is not the power that makes an illegal monopoly. Illegal power must be appraised in terms

of the competitive market for the product.”); TV Commc’ns Network, Inc. v. Turner Network

Television, Inc., 964 F.2d 1022, 1025 (10th Cir. 1992) (“TVCN’s amended complaint specifically

names the TNT channel as the relevant product market monopolized by TNT. However, a company

does not violate the Sherman Act by virtue of the natural monopoly it holds over its own product.”).

The plaintiffs here do not allege sufficient facts to establish a relevant product market. The

purported “market in which Defendant ISACA is a monopoly is called the CMMI Certification

Business.” (Dkt. 45, No. 22 C 4465 ¶ 23). But the CMMI Certification is simply ISACA’s

exclusive product, commercialized from its nonprofit development by the Software Engineering

Institute with Carnegie Mellon University. (Id. ¶¶ 23, 25). And a manufacturer’s own product does

not generally “comprise a relevant product market.” Green Country, 371 F.3d at 1282. Moreover,

the plaintiffs fail to explain what the CMMI product is, why the product is useful, what market it

operates in, what products might have reasonable interchangeability, and—if the relevant product

is simply a company’s own product—how their case falls outside the general rule outlined above.

E.I. du Pont, 351 U.S. at 404. The complaint’s many statements about adverse “impact[s] [on] the

consumer” and the “monopoly” held by ISACA only amount to hollow, conclusory statements—

exactly what Twombly cautioned against. (Dkt. 45, No. 22 C 4465 ¶ 23); see also AAPS, 15 F.4th

at 834 (“Repetition cannot substitute for factual allegations.”).

The claim for unjust enrichment fares no better. Unjust enrichment occurs when a

defendant wrongly retains “a benefit to the plaintiff’s detriment, and that defendant’s retention of

the benefit violates the fundamental principles of justice, equity, and good conscience.” Cleary v.

Philip Morris, Inc., 656 F.3d 511, 516 (7th Cir. 2011) (quoting HPI Health Care Servs., Inc. v. Mt.

Vernon Hosp., Inc., 545 N.E.2d 672, 679 (Ill. 1989)). “Claims for breach of contract and unjust

enrichment are mutually exclusive: ‘[U]njust enrichment is based on an implied contract,’ so it

does not apply when an actual contract governs the parties’ relationship.” Blanchard & Assocs. v.

Lupin Pharmaceuticals, Inc., 900 F.3d 917, 921 (7th Cir. 2018) (quoting People ex rel. Hartigan

v. E&E Hauling, Inc., 607 N.E.2d 165, 177 (Ill. 1992)); see also SodexoMAGIC, LLC v. Drexel

Univ., 24 F.4th 183, 228 (3d Cir. 2022) (“[T]he Pennsylvania Supreme Court has left no doubt that

unjust enrichment is inapplicable when the relationship between parties is founded upon a written

agreement or express contract, regardless of how harsh the provisions of such contracts may seem

in the light of subsequent happenings.” (cleaned up)). The three plaintiffs identify as “contractors

of Defendant ISACA’s CMMI Certification Business,” (Dkt. 45, No. 22 C 4465 ¶ 1), and declare

that “the relationship between [the plaintiffs] and ISACA is clearly founded upon a contract,” (Dkt.

52, No. 22 C 4465 at 13). The conceded existence of a contract decides the case easily. The

plaintiffs cannot recover, as unjust enrichment “does not apply when an actual contract” exists.

Blanchard, 900 F.3d at 921.

Given these two deficiencies and other potential issues, ISACA asks that the complaints

be dismissed with prejudice. Ordinarily though, plaintiffs are afforded the chance to amend their

complaints. Runnion ex rel. Runnion v. Girl Scouts of Greater Chi. & Nw. Ind., 786 F.3d 510, 519

(7th Cir. 2015). “Unless it is certain from the face of the complaint that any amendment would be

futile or otherwise unwarranted, the district court should grant leave to amend after granting a

motion to dismiss,” absent futility, undue delay, prejudice, or bad faith. Saint Anthony Hosp. v.

Eagleson, 40 F.4th 492, 517 (7th Cir. 2022) (quoting Runnion, 786 F.3d at 519). This strong

presumption counsels in favor of giving the three plaintiffs a chance to amend their complaints.

Doing so would not be futile, dilatory, prejudicial, or undertaken in bad faith. Riley, Dache, and

Schneider are also proceeding pro se; holding them to professional-lawyer standards of pleading

would be unfair and contrary to the spirit of the long-established rule that pro se complaints “are

held to less stringent standards than formal pleadings drafted by lawyers.” Alvarado v. Litscher,

267 F.3d 648, 651 (7th Cir. 2001) (quoting Haines v. Kerner, 404 U.S. 519, 520 (1972) (per

curiam)).

A few gentle reminders for the plaintiffs if they choose to file amended complaints. Federal

Rule of Civil Procedure 8 states that every “pleading that states a claim for relief must contain …

a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ.

P. 8(a)(2) (emphasis added). To that end, paragraphs in a complaint should have one or two

(generally short) sentences. Background information is also necessary. “Federal judges are

generalists,” so assuming familiarity with a particular industry invites confusion. Chi. Truck

Drivers, Helpers & Warehouse Workers Union (Indep.) Pension Fund v. CPC Logistics, Inc., 698

F.3d 346, 350 (7th Cir. 2012). And articulating clear facts is only half of the work—facts must be

paired with a correct understanding of the law.

For these reasons, the defendant’s motions to dismiss for failure to state a claim are granted.

(Dkt. 48, No. 22 C 4465; Dkt. 23, No. 22 C 4644; Dkt. 23, No. 22 C 5566). The dismissal shall be

without prejudice to the filing of an amended complaint or complaints no later than July 5, 2023.

If no complaint is filed by that date, the dismissal shall convert to one with prejudice. The motion

for a class action is dismissed as moot. (Dkt. 62).

J fo”

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LPAI 1, A MV AEN,

VA ia M. Kendall

Unifed States District Judge

Date: June 14, 2023