SPINNER CONSULTING LLC v. BANKRUPTCY MANAGEMENT SOLUTIONS, INC.

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

SPINNER CONSULTING LLC, plaintiff No. 18-cv-12258-KM-MAH

vs OPINION

BANKRUPTCY MANAGEMENT eo)

SOLUTIONS, INC.,

Defendant.

KEVIN MCNULTY, U.S.D.J.:

This matter comes before the Court on the motion of the defendant

Bankruptcy Management Solutions, Inc. (“BMS”) to dismiss the complaint. (DE

16). Plaintiff Spinner Consulting LLC (“Spinner”) alleges that BMS participated

in a horizontal conspiracy with its competitors to fix the manner of charging

fees for its bankruptcy software and services in violation of the Sherman Act,

15 U.S.C. § 1.

When a debtor files a Chapter 7 petition in bankruptcy, an estate

containing the debtor’s property is created and a trustee is appointed to

administer the estate. BMS provides software and services to assist in the

trustee’s administration of the estate.

After the 2008 financial crash, BMS and its competitors successfully

lobbied the Executive Office of the United States Trustee (“EOUST”) to suspend

the former rule that prohibited banks from charging a fee. Sometime after April

of 2011, BMS implemented the payment structure at issue here: Its

bankruptcy support and software services would be sold only in combination

with banking services, and it would charge a set percentage of the funds in the

estate’s bank account for those combined services. BMS’s competitors have set

up their payment structures in the same manner.

On March 31, 2015, Robert Fusari filed a Chapter 7 petition for

bankruptcy. On April 27, 2015, Alan E. Gamza (the “Trustee” or “Gamza”"}) was

appointed as the Fusari estate’s trustee. On June 8, 2015, Gamza entered into

a contract with BMS, under which Gamza agreed to deposit with Rabobank

N.A. (“Rabobank”) the funds of the Fusari estate. Gamza agreed to allow

Rabobank to automatically withdraw a monthly fee from the estate. Rabobank

deducted $15,627.98 in fees from the Fusari estate for combined banking and

software services. After the bankruptcy case settled, Fusari executed an

agreement with Spinner, under which Spinner acquired the residual property

that had re-vested in Fusari after distributions to creditors.

On July 31, 2018, Spinner filed a one-count antitrust complaint against

BMS. BMS filed a motion to dismiss the complaint, arguing that (1) Spinner is

not a “direct purchaser” of its product or a proper party to bring this suit, and

therefore lacks antitrust standing; (2) its lobbying efforts to EOUST are

absolutely privileged under the Noerr-Pennington doctrine; (3) a release

provision in the Bankruptcy Court’s May 6, 2016 Order bars this action; and

(4) Spinner has failed to state a claim under Federal Rule of Civil Procedure

12(b)(6).

For the reasons stated below, Spinner’s motion to dismiss the complaint

for lack of antitrust standing is granted. The direct-purchaser rule—concededly

a somewhat arbitrary, policy-based rule—dooms the claims of Spinner, an

indirect victim of the alleged antitrust injury to the trustee on behalf of the

estate as purchaser of BMS’s services.

I do not reach the other grounds for dismissal.

I. Facts!

A. Bankruptcy Support Services

Upon the filing of a Chapter 7 bankruptcy petition, the Office of the

United States Trustee, a division of the United States Department of Justice,

appoints a trustee from the private sector to administer the estate. (Compl

q11). The trustee is compensated by the estate and is responsible for collecting

and liquidating the debtor’s property. (Compl 9411-12). The trustee is also

required to submit reports regularly to the Bankruptcy Court. (Compl. 412).

Trustees use software to help them meet those reporting obligations. (Compl.

413).

Since approximately 1987, BMS has provided bankruptcy support

services. (Compl 713). BMS is the largest provider of bankruptcy support

services, including software, in the United States. (Compl 44). BMS has more

than a fifty percent share of “the number of Trustees in the United States.”

(Compl 920). Epiq eDiscovery Solutions, Inc. (“Epiq”) is BMS’s largest

competitor, with a thirty percent share, and TrusteSolutions (“TES”) is the

second largest competitor of BMS, having a fifteen percent share. (Compl 4{5-

6, 20). BMS developed the software that is used by bankruptcy trustees, and

secured copyright protection over their software. (Compl {415-16). BMS’s

competitors have developed and maintained comparable software. (Compl 417).

Prior to the financial crisis in 2008, trustees had received software

services directly from the bank that held the estate’s assets. (Compl (14, 25).

BMS therefore did not directly charge the estate for its services. (Comp! 725).

| As required at this stage, the Court accepts the factual allegations in the

complaint as true. For ease of reference, certain items from the record will be

abbreviated throughout this Opinion as follows:

DE = Docket entry number in this case;

Comp! = Spinner’s complaint (DE 1);

DBr = Defendant BMS'’s brief in support of its motion to dismiss (DE 16);

PBr = Spinner’s opposition brief (DE 22);

DRBr = BM9’s reply brief (DE 24).

Instead of a direct charge, BMS “would direct the Estate to deposit its fund in a

selected bank.” (Compl 425). BMS required the trustees who used its services

to deposit the funds of the estates at “a partner bank of BMS.” (Compl 420).

Before November of 2012, BMS required trustees to deposits funds at the Bank

of New York Mellon. (Comp! 421).

After the funds of the estate were deposited into BMS’s selected bank,

the bank would “earn money from these deposits” and would pay a fee to the

bankruptcy software provider. (Compl 425).? The bank paid this fee through a

reduction in the estate’s interest income, in essence, by providing a lower rate

of interest on Chapter 7 estate deposits as compared to commercial clients.

(Compl, 136, Ex. A at 2). This allowed the bank to earn money from the

deposit, and the bank would then pay a fee to BMS as well as interest to the

estate. (Id.). It appears that the process was set up in this manner, instead ofa

direct charge because, at the time, the U.S, Trustees’ rules governing Chapter 7

bankruptcy accounts prohibited banks from charging a fee for their services.

(Compl 134).3

After the financial crisis in 2008, interest rates declined, and

consequently, “the amount of money that the bank could earn from the

deposits of Estates also declined, as did the bank’s ability to pay BMS a fee.”

(Compl 426). Chapter 7 accounts were no longer profitable for banks, who

responded by reducing interest rates and initial “collateral and administrative

charges,” and discouraging trustee deposits. (Compl, Ex. A, at 1). One major

bank responded by ceasing its participation in the Chapter 7 program entirely.

(fd. at 2).

In response, BMS, Epiq, and TES requested that the U.S. Trustee

suspend the rule that prohibited banks from charging a fee in order to allow

trustees to pay bank fees from estate accounts. (Compl 439}. BMS recognized

BMS started as a “spin-off off of a bank that had previously provided free

bankruptcy software to Trustees.” (Compl 714).

3 It is not clear from the complaint whether there was similar rule in place at the

time that barred bankruptcy support services from directly charging the estate.

that the goal of any proposed solution should take into account certain

“conditions,” including that the crisis was temporary, that banks should

receive adequate compensation so that they remained active participants in

Chapter 7 programs, and that any solution should continue “the historical

process of allocating the cost of the services to the estates that are the

beneficiaries of those services.” (Compl, Ex. A).

On or about November 26, 2010, BMS submitted a letter to the Executive

Offices of the U.S. Trustee, noting the following:

In several conversations with various participant banks, a number

of options have been discussed. Satisfying all of the conditions

presented above, however, left a single structural option. Although

the numbers vary slightly for each bank, the structure is constant

with two key components:

First, since estates do not currently pay for services (banking and

software) through a reduction in their interest income, have them

continue to pay for these services via a service fee, as a of average

deposit balance assessed monthly on each account.

Second, while there would be a base service fee percentage the

actual percentage applied would vary reflecting changes, hopefully

improvements, in the interest rate market by being tied to the

Effective Federal Funds rate. As the Effective Federal Funds Rate

increases, the service fee would be reduced, eventually

disappearing as bank interest rates increase.

(Compl 436). BMS proposed that a monthly fee be “applied evenly” to all

Chapter 7 accounts. (Compl., Ex. A, at 3). Based on its “conversations with the

banks and independent research regarding bank costs and profitability

targets,” BMS “believed that a rate as low as 3% with the fee adjustment

reflecting the actual [Effective Federal Funds rate (EFF)] may be adequate to

attract the banks to continue their full participation to include the funding of

the software providers.” (Compl, Ex. A at 4).4

Prior to submitting this letter, Spinner alleges that BMS considered selling its

software by directly charging estates a fee on either a (1) per trustee basis; (2) per case

basis, or (3) per transaction basis. (Compl 27-28). Spinner claims that BMS

preferred the model of charging estates for combined software and banking services

Sometime after BMS drafted this letter, Epiq received and reviewed it,

and provided its own comments to the U.S. Trustee on January 18, 2011.

(Compl 4937-38, 76 Ex. B). In preparing its comments, Epiq reviewed the

remarks that had been “submitted previously by other market participants and

solicited input from all financial institutions with which Epiq Systems has

relationships in the Chapter 7 environment.” (Compl, Ex. B). With respect to

BMS’s proposal, Epiq indicated that the proposed “structure would promote

future stability for trustees’ activities,” and “would be accessed uniformly to all

estate accounts.” (Compl 37, Ex. B). On or about January 21, 2011, TES

requested that the U.S. Trustee allow this fee. (Compl 7 39, 77).

Spinner alleges that the November 26, 2010 BMS document is evidence

of a conspiracy because it demonstrates that “BMS had conversations with

various banks participating in the Chapter 7 program, which necessarily

included the partner banks of BMS’s horizontal competitors” and “BMS

reached an agreement with at least one of those banks, and therefore one of

BMS’s horizontal competitors, to fix the manner of selling and charging for

combined bankruptcy support services and bankruptcy banking services.”

(Compl 474).

Spinner further alleges that “upon information and belief,” BMS, Epiq,

and TES “communicated directly about selling bankruptcy support services

only in combination with bankruptcy banking services” sometime before the

November 26, 2010 BMS document, and have since been in regular

communication. (Compl qf 72, 82).°

based on a percentage of the money in the bank account of the estate because it

“would not allow Estates to determine the extent to which BMS, as opposed to its

partner bank, received a fee.” (Compl 430).

5 To support its allegation that the three companies have been in regular contact

and communication, Spinner alleges that representatives from the three companies

have attended bankruptcy law conferences, which provided the companies an

opportunity “to meet with each other and discuss, coordinate and otherwise advance

the conspiracy among them.” (Compl 4483-85). Spinner has also pulled a portion of

court transcript from In re Bradley & Michelle Dorfler, et al, No. 10-51411 (MSS) (N.D.

On or about January 21, 2011, Texas Capital Bank, on its and TES’s

behalf, proposed to the U.S. Trustee “that Estates be charged for combined

bankruptcy support services” and “banking services based upon a percentage

of the amount of money in the Estate.” (Compl 78). Texas Capital bank stated

the following:

Due to the current interest rate environment financial institutions

are able to secure deposits at virtually no operational cost. The

current UST program requires a high level of operational support,

including banking support, software support and hardware

support to bankruptcy trustees to remain in compliance with the

UST requirements to administer bankruptcy estates that cannot be

offset solely by the value of deposits maintained. Therefore TCB

will need to assess to the bankruptcy estates a monthly Custodial

Fee as a percentage of balances maintained to offset the

operational support provided. Depending on the level of operational

support required and the interest rate environment TCB will

annually adjust the Custodial Fee accordingly.

(Compl 978 (emphasis omitted)). Spinner alleges, “upon information and belief,”

that Texas Capital Bank communicated this information “to BMS and Epiq,

either directly or indirectly.” (Compl 4/79).

On or about April 29, 2011, the U.S. Trustee agreed to suspend the rule

that prohibited trustees from paying bank service fees from estate accounts.

(Compl 940). It appears that even though the rule was suspended, the U.S.

Trustee did not specify how the fee should be calculated, assessed, or paid.

Spinner alleges that after this rule was suspended, BMS, Epiq, and TES,

“upon information and belief, reaffirmed their conspiracy to sell Estates

Ohio), where the following exchange occurred between the court and a representative

of BMS, Steve Coffey, in the presence of an Epiq representative, Schott Field:

THE COURT: Okay. Mr. Coffey, you heard me — I'll make sure your

counsel doesn’t mind my asking you questions directly. You know, if I’m

asking — if I start to veer into any trade secrets or confidential

information, then simply say so.

MR. COFFEY: I don’t think there will be a problem. Mr. Field is in the

room and I don’t think we had a lot of secrets between us so that’s fine.

(Compl 786).

bankruptcy services only in combination with bankruptcy banking services,

and to charge no fee to an Estate for those combined services other than a

percentage of the amount in the bank account of the Estate.” (Compl { 41-

42).

Sometime after April 29, 2011, BMS and “its partner bank entered into

agreements with Trustees that required their Estates to pay a combined fee for

bankruptcy support services and bankruptcy banking services” based on “a

percentage of the money in the account of the Estate.” (Compl 443). BMS and

its partner bank “then began deducting as a fee for those combined services a

percentage of the money” in the estates’ accounts. (Compl 444). BMS

“continues to sell bankruptcy support services only in combination with

bankruptcy banking services, and to charge Estates no fee for those combined

services other than a percentage of the amount in the bank account of the

Estate.” (Comp! 946). Since 2012, BMS has used Rabobank as its “partner

bank,” and has required trustees to deposit the funds of the estate there.

(Compl {7).®

Neither BMS, Epiq, nor TES has charged a fee for bankruptcy support

services “(a) on a per trustee basis, (b) on a per case basis, or (c) on a per

transaction basis.” (Compl 445). At the time the complaint in this action was

filed, BMS and Rabobank charged fees at the annual rate of 1.75 percent “of

the amount on deposit at Rabobank.” (Compl 447). Epiq “and its partner banks

charge” a 1.75 percent fee on the amount on deposit, and TES and “its partner

banks charge fees at the annual rate of 1.9 percent of the amount on deposit at

those banks.” (Comp! 947).”

6 Rabobank currently holds about two billion dollars in deposits from trustees

who contract with BMS. (Comp! 724).

? As noted by BMS, the complaint does not allege that the partner banks were

part of this conspiracy, or that BMS, Epiq, TES agreed on a certain percentage. (DBr

at 5}. BMS also asserts that the complaint also does not allege “the date on which the

parties would switch” to this percent-based fee model, “the estate-size threshold above

which the percentage rate would kick in, or the estate-size at which the percentage-

based fee would be capped.” (DBr at 5 (citing Compl 441-47)}).

In June of 2011, BMS stated in a “publicly distributed” document that

the service fee was not negotiable, “[i]n order to provide equal treatment in all

bankruptcy cases.” (Compl 991). The “document” further stated that “the

Service Fee is based on a uniform rate as set forth above and is a condition of

participation in the BMS program.” (Compl 491).

Spinner claims that since late 2011, BMS, Epiq, and TES have “refused

to negotiate fees with Trustees.” (Compl 92). In a declaration submitted by

Coffey of BMS in In re Nanodynamics, Inc., No. 09-13438 (MJK) (W.D.N.Y.),

dated September 12, 2011, Coffey addressed the issue of the fee in response to

the Court’s concerns regarding the pricing for BMS’s services. (Compl 94).8

The Court expressed concern “that the business model, pricing, . . . [was]

not based on monthly activity [or] on the burdens upon the service providers,

[but was] based simply upon how many dollars are in an account.” (Comp! 494

(alterations added)). In response, Coffey certified that:

21. The Court’s observation is essentially correct, but that should

not affect the allowance of the BMS Service Fee as an

administrative expense, for at least three reasons. ... Where, as

here, the trustee in the exercise of his discretion has determined

that the foregoing requirements are satisfied, 1 am not aware of

anything that requires that a claim be measured by any particular

method, such as the (a) cost to the provider of providing the

service; (b) the amount of the service actually used by the estate

each day; or (c) the price at which a competitor might be willing to

offer a similar product, albeit with a lower quality of service. If it

were otherwise, then administrative expenses for things like a

trustee’s compensation under section 326(a), the UST’s quarterly

fees, or even the rent paid by a trustee for a facility to store estate

property, would all be subject to retrospective revaluation on an

individual case basis. I would submit that under such a regime,

few, if any, parties would be willing to do business with a chapter 7

trustee; BMS and BNY Mellon certainly would not.

22. Second, the BMS ‘flat’ percentage fee structure exists for a

reason, much like the rate structures for trustee compensation,

UST quarterly fees, and, say monthly premises rent, are ‘flat fee’

based, rather than being based [on] use or activity levels. The

8 Spinner has only provided the above-quoted snippets of the court transcripts.

reason is that no other structure is administratively feasible. BMS

and BNY Mellon do business with hundreds of trustees across the

nation, who collectively handle more than 50,000 ‘asset’ cases

currently (in addition to hundreds of thousands of ‘no asset’ cases

annually), it would be utterly impractical for BMS and BNY Mellon

to negotiate hundreds, or thousands, of ‘one-off deals’ with

individual trustees, based on the facts and circumstances of each

case; the costs of evaluating, negotiating and monitoring so many

unique contracts would by themselves be prohibitive, to both the

trustees and to BMS and BNY Mellon. While the trustee services

business may, if this interest rate environment continues,

ultimately evolve to a different model, where pricing is based on a

set schedule of fees and charges for numbers and types of

transactions, at this point, that is simply not a business model

that BMS and BNY Mellon are prepared to offer. When and if any

other providers are willing to offer services under such a model,

trustees of course have the ability to terminate their arrangements

with BMS and BNY Mellon on 30 days notice, and to contract with

such providers, to the extent that the trustees believe that they

should do so in accordance with the exercise of their fiduciary

duties.

(Comp! 94).

Spinner’s complaint includes allegations of “circumstantial evidence” of

the alleged conspiracy. (Compl {J 80-102). On Epiq’s Form 10K, filed on

February 25, 2011 with Securities and Exchange Commission (before the U.S.

Trustee agreed to suspend the rule), Epiq represented that it does not compete

“in the market for bankruptcy support services based upon price.” (Compl

1187-90). Jill Bauer, the Managing Director of Trustee and Fiduciary Services

for Epiq, executed a declaration on January 12, 2016, confirming that

bankruptcy support service providers competed only in terms of market share,

and not in terms of price. (Compl 495).

Spinner also alleges that Bankruptcy Courts have questioned whether

trustees “should pay combined fees for bankruptcy support services and

bankruptcy banking services from Estate accounts.” (Compl 490; see Compl

798 (citing In re Canopy, no. 09-44943 (ERW) (Bankr. N.D. IIl.))). Spinner

points to the following exchange between a Bankruptcy Court in the Northern

District of Illinois and a trustee:

10

MR. PALOIAN: And so what we face now are the bundled services

of Epic plus a bank.

THE COURT: Okay. I think what we need is to unbundle it.

MR. PALOIAN: Yeah, exactly, Judge. I couldn’t agree more. I’ve

tried to do this. I’ve had these discussions. We’re not necessarily at

the point. I have not been able to get a direct quote for just

trustee/Epic [sic] software services.

(Compl 998 {alteration in original)).

In terms of the amount charged by the software companies, Spinner

asserts that it is excessive, and that trustees have written complaints about the

amount charged to the National Association of Bankruptcy Trustees. (Comp! 7]

100-01). Additionally, in a memorandum from Epiq to the Administrative Office

of the U.S. Courts dated April 2, 2012, an Epiq representative advised that

“Banks will not enter into this business and wait for an order in the future

authorizing the fee on a case-by-case basis or possibly risk disgorgement

should a court determine them unreasonable.” (Compl 4102). However, the

Epiq representative also noted that “This does not mean that the judiciary

needs to authorize the fees presently being charged by banks. The courts could

authorize some smaller number they feel is ‘reasonable’ (such as 0.50% to

0.75%) and then allow a bank to request a higher amount for unique

situations.” (Id.).

B. Fusari Bankruptcy Petition

On or about March 31, 2015, Robert Fusari filed a petition for

bankruptcy under Chapter 7 of the Bankruptcy Code in the United States

Bankruptcy Court for the District of New Jersey. (Compl §{ 8, 48). As a result

of that filing, an estate was created, comprised Fusari’s property at the time of

the filing of the petition. (Compl 410).

After the U.S. Trustee appointed a Chapter 7 trustee for the estate, on or

about April 27, 2015, the creditors of the Fusari estate elected Alan E. Gamza

Trustee (“Gamza”) to replace the appointed Chapter 7 trustee. (Compl 449).

11

On or about June 8, 2015, Gamza entered into a contract with BMS, and

agreed to deposit with Rabobank all, or substantially all, of the funds of any

estate for which he used BMS’s bankruptcy support services. (Compl {450-51).

Gamza also agreed with BMS to allow Rabobank to automatically withdraw a

monthly fee from the estate, “without any approval of the Bankruptcy Court or

notice to the creditors.” (Compl 451). On that same date, Gamza entered into a

separate contract with Rabobank that authorized Rabobank to automatically

withdraw the monthly fee from the estate accounts, without seeking approval

from the Bankruptcy Court of providing notice to the creditors. (Compl 4]52-

53).

From April 27, 2015, through October 20, 2015, Gamza deposited the

funds from the Fusari estate into an account at Rabobank. (Compl 454).

Rabobank deducted $15,627.98 from the Fusari estate as a fee. (Compl 4455,

57). Spinner alleges that Rabobank paid this fee to BMS and that the “amount

Rabobank deducted in fees .. . was greater than the amount of the fees that

would have resulted in the absence of a conspiracy involving BMS to fix the

manner of charging Estates a combined fee for bankruptcy support services

and bankruptcy banking services.” (Compl 458).

On May 6, 2016, the Fusari case settled. (Compl 462). The Bankruptcy

Court entered an order on that date, incorporating the terms of the settlement.

That May 6, 2016 Order required that the residual property of the Fusari estate

be re-vested in Fusari. (Compl 498, 63).9 In particular, paragraph 16 of the

Order provided as follows:

16. Revesting of Property in Debtor. Upon dismissal of the

Bankruptcy Case, all property of the Debtor’s estate and of the

Entities remaining after payment of the amounts set forth above

wherever located shall revest in the Debtor without further Order

of the Court.

9 BMS attached the May 6, 2016 order, which is referenced in the complaint, as

an exhibit to its motion to dismiss. (DE 17-2, Ex. B).

12

(Compl 463).1°

All payments under the order were made on or before June 1, 2018.

(Compl 466). Thereafter, on July 27, 2018, Fusari executed an agreement with

Spinner, and Spinner acquired the property that had vested in Fusari. (Compl

41 9, 67). Spinner alleges that the property that it acquired from Fusari

“includes the claim asserted in this action.” (Compl 767). Spinner also claims

that “as successor to Fusari,” it has “sustained an injury in fact” that was

caused by the “overcharge.” (Compl 4104).

Cc. Procedural History

On July 31, 2018, Spinner filed a complaint against BMS in this Court,

alleging that BMS, Epiq, and TES conspired to sell bankruptcy support services

“only in combination with bankruptcy banking services, and to charge Estates

no fee for those combined services other than a percentage of the amount in

the bank account of the Estate,” in violation of the Sherman Act, 15 U.S.C, § 1.

10 The May 6, 2016 Order also included a release:

Upon the payment in full of the Initial Settlement Payments identified

above to the applicable Parties, the estate and the Debtor on his own

behalf and on behalf of his Entities, heirs, executors, administrators,

agents, representatives, successors and assigns, and on behalf of any

and all heirs and assigns release, acquit and forever discharge the

Parties, the Creditors and the Parties-in-Interest identified above

(including Gaines and Lowenstein) and their present and former officers,

directors, parents, subsidiaries, affiliated companies, employees,

independent contractors, agents, representatives, and attorneys, and their

respective heirs, executors, administrators, agents, representatives,

successors and assigns of and from any and all debts, suits, claims,

judgments, actions, causes of action, demands, rights, damages,

expenses, costs, attorneys’ fees, and compensation whatsoever, known or

unknown, foreseen and unforeseen, that the Debtor or any of the Entities

has, had or may have, arising from facts, events, circumstances, actions or

omissions from the beginning of time until the Effective Date of this

Settlement Agreement, including without limitation all claims and causes

of action that were raised or could have been raised in this Bankruptcy

Case or relating to the Bankruptcy Case.

(DE 17-2, Ex. B, at {5(c)). The order is binding on all the parties, “and their successors

and assigns.” (DE 17-2, Ex. B, at 932).

13

(Comp! 469). The complaint alleges individual and class claims. (Compl 113-

120).

On October 1, 2018, BMS filed a motion to dismiss the complaint,

arguing that (1) Spinner lacks antitrust standing because it is not the “direct

purchaser” of BMS’s software and support services; (2) BMS’s efforts to lobby

for regulatory change are absolutely privileged; (3) the release provision in the

May 6, 2016 order bars Spinner’s claim; and (4) Spinner has failed to plead

sufficient facts to state a claim. (DE 16}. Spinner has filed papers in opposition

to BMS’s motion. (DE 22).

II. Standard

Federal Rule of Civil Procedure 8(a) does not require that a complaint

contain detailed factual allegations. Nevertheless, “a plaintiff's obligation to

provide the ‘grounds’ of his ‘entitlement to relief requires more than labels and

conclusions, and a formulaic recitation of the elements of a cause of action will

not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see Phillips v.

Cnty. of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008) (Rule 8 “requires a

‘showing’ rather than a blanket assertion of an entitlement to relief.” (citation

omitted)). Thus, the complaint’s factual allegations must be sufficient to raise a

plaintiff's right to relief above a speculative level, so that a claim is “plausible

on its face.” Twombly, 550 U.S. at 570; see also West Run Student Hous.

Assocs., LLC v. Huntington Nat'l Bank, 712 F.3d 165, 169 (3d Cir. 2013).

That facial-plausibility standard is met “when the plaintiff pleads factual

content that allows the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662,

678 (2009) (citing Twombly, 550 U.S. at 556}. While “{t]he plausibility standard

is not akin to a ‘probability requirement’ . . . it asks for more than a sheer

possibility.” Id.

Rule 12(b)(6) provides for the dismissal of a complaint if it fails to state a

claim upon which relief can be granted. The defendant, as the moving party,

bears the burden of showing that no claim has been stated. Animal Sci.

14

Products, Inc. v. China Minmetals Corp., 654 F.3d 462, 469 n.9 (3d Cir. 2011).

For the purposes of a motion to dismiss, the facts alleged in the complaint are

accepted as true and all reasonable inferences are drawn in favor of the

plaintiff. New Jersey Carpenters & the Trustees Thereof v. Tishman Const. Corp.

of New Jersey, 760 F.3d 297, 302 (3d Cir. 2014).

When deciding a motion to dismiss, a court typically does not consider

matters outside the pleadings. However, a court may consider documents that

are “integral to or explicitly relied upon in the complaint” or any “undisputedly

authentic document that a defendant attaches as an exhibit to a motion to

dismiss if the plaintiff's claims are based on the document.” In re Rockefeller

Ctr. Props., Inc. Sec. Litig., 184 F.3d 280, 287 (3d Cir. 1999) (emphasis and

citations omitted); see In re Asbestos Prods. Liab. Litig. (No. V1), 822 F.3d 125,

133 n.7 (3d Cir. 2016); Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014).

Reliance on these types of documents does not convert a motion to

dismiss into a motion for summary judgment. “When a complaint relies on a

document ... the plaintiff obviously is on notice of the contents the document,

and the need for a chance to refute evidence is greatly diminished.” Pension

Benefit Guar. Corp. v. White Consol. Indus., Inc., 998 F.2d 1192, 1196-97 (3d

Cir. 1993).

“While ‘there is no heightened pleading standard in antitrust cases, and

the general principles governing Rule 12(b)(6) motions apply,’ an antitrust

plaintiff must ‘plead his complaint with particularity; a complaint, or

counterclaim containing only conclusory recitations of law is insufficient to

survive a motion to dismiss.” Animal Sci. Prods., 34 F. Supp. 3d at 484

(quoting In re K-Dur Antitrust Litig., 338 F. Supp. 2d 517, 529 (D.N.J. 2004)).

An antitrust plaintiff must do more than make “allegations of consequential

harm resulting from a violation of the antitrust laws,” and that is true even

when the complaint is “buttressed by an allegation of intent to harm.”

Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters

(“AGC”), 459 U.S. 519, 545, 103 S. Ct. 897, 74 L. Ed. 2d 723 (1983).

15

Even when a complaint makes these allegations, it may not proceed

when “[o]ther relevant factors — the nature of the [claimant’s] injury, the

tenuous and speculative character of the relationship between the alleged

antitrust violation and the [claimant’s] alleged injury, the potential for

duplicative recovery or complex apportionment of damages, and the existence

of more direct victims of the alleged conspiracy — weigh heavily against judicial

enforcement.” Id.; see Twombly, 550 U.S. at 557-58 (“[S]omething beyond the

mere possibility of [relief] must be alleged, lest a plaintiff with a largely

groundless claim be allowed to take up the time of a number of other people,

with the right to do so representing an in terrorem increment of the settlement

value.” (internal quotation marks omitted)).

An issue presented in this motion is antitrust standing. Article Iil

standing and antitrust standing are “distinct” concepts. Hartig Drug Co. Ine. v.

Senju Pharm. Co., 836 F.3d 261, 269-70 (3d Cir. 2016). “Unlike Article Ill

standing, statutory standing is not jurisdictional.” Leyse v. Bank of Am. Nat'l

Ass’n, 804 F.3d 316, 320 (3d Cir. 2015) (citing Lexmark Int'l, Inc. v. Static

Control Components, Inc., 134 S. Ct. 1377, 1388, 188 L. Ed. 2d 392 &n.4

(2014).

Thus, dismissal for lack of statutory standing is properly addressed as a

matter of sufficiency of pleading under Rule 12(b}(6), rather than under Rule

12(b)(1). See id.; see also NicSand, Inc. v. 3M Co., 507 F.3d 442, 449 (6th Cir.

2007) (“antitrust standing and Article III standing are not one and the same,

and we not only may — but we must — reject claims under Rule 12(b)(6) when

antitrust standing is missing.”).

Ill. Discussion

BMS argues that Spinner lacks antitrust standing because it is not a

“direct purchaser” of its software (and services, presumably). (DBr at 7-13

(citing Mlinois Brick Co. v. Minois, 431 U.S. 720, 97 S, Ct. 2061 (1977).

Relatedly, BMS argues that Spinner is not a “proper party,” or the most

effective plaintiff from among those who have suffered the alleged antitrust

16

injury. See AGC, 459 U.S. at 537-38; see also Ethypharm S.A. France v. Abbott

Labs., 707 F.3d 223, 232-33 (3d Cir. 2013).

i. The Sherman Act and Antitrust Standing

The Sherman Act declares that “every contract, combination in the form

of trust or otherwise, or conspiracy, in restraint of trade or commerce among

the several States, or with foreign nations . . . to be illegal.” 15 U.S.C. § 1. To

state a claim, a plaintiff must establish four elements: “(1) that the defendants

contracted, combined, or conspired among each other; (2) that the combination

or conspiracy produced adverse, anti-competitive effects within relevant

product and geographic markets; (3) that the objects of and the conduct

pursuant to that contract or conspiracy were illegal; and (4) that the plaintiff

was injured as a proximate result of that conspiracy.” Animal Sci. Prods., 34 F.

Supp. 3d at 480 (citation and internal quotations omitted).

“While the rule of reason typically mandates an elaborate inquiry into the

reasonableness of a challenged business practice, there are certain agreements

or practices which because of their pernicious effect on competition and lack of

any redeeming virtue are conclusively presumed to be unreasonable.” Id. at

481 (quotations and citation omitted). The types of “agreements or practices”

that lack “any redeeming virtue” and are therefore “presumed to be

unreasonable and therefore illegal without elaborate inquiry as to the precise

harm they have caused or the business excuse for their use. . . are price

fixing, division of markets, group boycotts, and tying arrangements.” Id.

(quotation and citation omitted); see also Deutscher Tennis Bund v. ATP Tour,

Inc., 610 F.3d 820, 830 (3d Cir. 2010) (“Some categories of restraints, such as

horizontal price-fixing and market allocation agreements among competitors,

‘because of their pernicious effect on competition and lack of any redeeming

virtue are conclusively presumed to be unreasonable.” (citation omitted)).

Section 4 of the Clayton Act, 15 U.S.C. § 15, provides a private right of

action to “any person who shall be injured in his business or property by

reason of anything forbidden in the antitrust laws.” (emphasis added). The

17

broad language of § 4 reflects Congress’ intent to “create a private enforcement

mechanism that would deter violators and deprive them of the fruits of their

illegal actions, and would provide ample compensation to the victims of

antitrust violations.” Blue Shield of Va. v. McCready, 457 U.S. 465, 472, 102 5.

Ct. 2540, 73 L. Ed. 2d 149 (1982). Although the statutory language is broad,

courts have developed a number of related doctrines that limit which parties

may assert claims for damages. Id. at 473. In general, these doctrines seek to

place antitrust claims in the hands of the most efficient enforcer of the

antitrust laws. Animal Sci. Prods., 34 F. Supp. 3d at 491.

“The term ‘standing’ as used in the antitrust context is conceptually

difficult and has not been delineated with precision.” In re Processed Egg Prods.

Antitrust Litig., 881 F.3d 262, 268 (3d Cir. 2018) (citing AGC, 459 U.S. at 536

(“There is a similarity between the struggle of common-law judges to articulate

a precise definition of the concept of ‘proximate cause,’ and the struggle of

federal judges to articulate a precise test to determine whether a party injured

by an antitrust violation may recover treble damages.”)). Antitrust standing

requires more than the familiar three-part test for Article Ill standing {injury in

fact, causation, and redressability). Id.

Antitrust standing “requires a plaintiff to ‘prove more than injury

causally linked to an illegal presence in the market.” id. (quoting In re

Modafinil Antitrust Litig., 837 F.3d 238, 263 (3d Cir. 2016)). The Supreme Court

has observed that an “antitrust violation may be expected to cause ripples of

harm to flow through the Nation’s economy.” McCready, 457 U.S. at 476-77.

Nonetheless, “[ijt is reasonable to assume that Congress did not intend to allow

every person tangentially affected by an antitrust violation to maintain an

action to recover threefold damages for the injury to his business or property.”

Id. at 477; see Cromar Co. v. Nuclear Materials & Equip. Corp., 543 F.2d 501,

505 (3d Cir. 1976) (noting that treble damages should be “confine[d] . . . to

those individuals whose protection is the fundamental purpose of the antitrust

laws.”).

18

Therefore, “the courts have sought to narrow the scope of the remedy

provided by § 4 by limiting the class of persons who have standing to sue

under that statute.” Bravman v. Bassett Furniture Indus., Inc., 552 F.2d 90, 96

(3d Cir. 1977). The Supreme Court has “articulated several factors to consider

when analyzing whether a plaintiff has such standing.” LifeWatch Servs. v.

Highmark Inc., 902 F.3d 323, 341 (3d Cir. 2018) (citing AGC, 459 U.S. at 538).

Based on the Supreme Court’s opinion in AGC, the Third Circuit has

summarized those factors as follows:

(1) the causal connection between the antitrust violation and the

harm to the plaintiff and the intent by the defendant to cause that

harm, with neither factor alone conferring standing; (2) whether

the plaintiff's alleged injury is of the type for which the antitrust

laws were intended to provide redress; (3) the directness of the

injury, which addresses the concerns that liberal application of

standing principles might produce speculative claims; (4) the

existence of more direct victims of the alleged antitrust violations;

and (5) the potential for duplicative recovery or complex

apportionment of damages.

Id. at 341-43 (quoting In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d

1144, 1165-66 (3d Cir. 1993)).

Merely derivative injuries sustained by employees, officers, stockholders,

and creditors of an injured company do not constitute “antitrust injury”

sufficient to confer antitrust standing. Pitchford v. PEPI, Inc., 531 F.2d 92, 97

(3d Cir. 1975) (holding that indirect harm that individual stockholder suffered

may not to be redressed through injury inflicted upon the corporation), cert.

denied, 426 U.S. 935, 96 S. Ct. 2649, 49 L. Ed. 2d 387 (1976); Loeb v. Eastman

Kodak Co., 183 F. 704 (3d Cir. 1910) (holding that injury to corporation, even if

caused by Sherman Act violation, is a claim belonging to the corporation, and

not to its stockholders or creditors); see Lovett v. General Motors Corp., 975

F.2d 518, 521 (8th Cir. 1992) (denying antitrust standing to sole shareholder

where only alleged injury stemmed from failure of corporation caused by

antitrust violation), cert. denied, 127 L. Ed. 2d 378, 114 S. Ct. 1058 (1994); see

19

also Sw. Suburban Bad. of Realtors, Inc. v. Beverly Area Planning Assoc., 830

F.2d 1374, 1378 (7th Cir. 1987).

ii. Direct Purchaser Rule

A second, closely related doctrine that affects which parties can sue for

antitrust damages is the direct-purchaser rule. “The Mlinois Brick direct

purchaser rule limits the scope of liability by choosing the most suitable

plaintiff from among the purchasers potentially harmed by cartel pricing.”

Animal Sci. Prods., 34 F. Supp. 3d at 492. Pursuant to Mlinois Brick, 431 U.S.

720, there is a “general rule that only direct purchasers from antitrust violators

may recover damages in antitrust suits.” Howard Hess Dental Labs., Inc, v.

Dentsply Intern., Inc. (“Hess I”), 424 F.3d 363, 369 (3d Cir. 2005); see Apple Inc.

v. Pepper, 139 S. Ct. 1514, 1520 (2019) (“we have consistently stated that ‘the

immediate buyers from the alleged antitrust violators’ may maintain a suit

against the antitrust violators.”); see also McCarthy v. Recordex Serv., Inc., 80

F.3d 842, 847-48 (3d Cir. 1996} (“[T]he [JIinois Brick] Court... enunciat[ed] a

bright-line rule that only the purchaser immediately downstream from the

alleged monopolist may bring an antitrust action.”).!!

On the other hand, “indirect purchasers who are two or more steps

removed from the violator in a distribution chain may not sue.” Apple Inc., 139

S. Ct. at 1520. Therefore, this private right of action does not extend to indirect

purchasers. Only overcharged direct purchasers, and not others in the chain of

manufacture or distribution, are parties “injured in [their] business or

ui The direct purchaser rule was first considered by the Supreme Court in

Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 88 S. Ct. 2224, 20 L. Ed.

2d 1231 (1968). In that case, a shoe manufacturer sued another manufacturer and

distributor of shoe machinery, alleging that the manufacturer had monopolized the

shoe industry. 392 U.S. at 483-84. The defendant argued that the plaintiff lacked

standing to sue because the plaintiff had effectively “passed on” any injury to its

customers. Id. at 488 n.6. The Supreme Court rejected that defense, finding that only

the “direct purchaser” of an illegally overcharged good, and not others in the chain of

manufacturing or distribution, is the party “injured” within the meaning of § 4. id. at

489-91.

20

property” within the meaning of the Act. Mlinois Brick, 431 U.S. at 729.!2 As is

the case with bright-line rules, the direct-purchaser rule means that there is no

reason to ask whether the rationales of Mlinois Brick “apply with equal force” in

every individual case. Kansas v. UtiliCorp United, Inc., 497 U.S. 199, 216, 110

S, Ct. 2807, 111 L. Ed. 2d 169 (1990). The Court does not engage in “an

unwarranted and counterproductive exercise to litigate a series of exceptions.”

Id. at 217. The rule, by design, is somewhat rigid and arbitrary.

In Mlinois Brick, the defendant was a brick manufacturer and distributor,

who sold bricks to contractors who, in turn, submitted bids to general

contractors. 431 U.S. at 726. These general contractors then created and

submitted bids to final consumers, like the State of Illinois. Jd. The State of

Illinois, representing a number of customers, sued the original manufacturer,

alleging that the brick manufacturer had engaged in an illegal price-fixing

conspiracy. Id. at 726-27. The Supreme Court held that Illinois, which

purchased the bricks following “two separate levels in the chain of

distribution,” id. at 726, was an indirect purchaser without standing. Id. at

735.

The direct purchaser rule seeks “to avoid the complications that would flow

from allowing suits by indirect purchasers.” Wallach v. Eaton Corp., 837 F.3d 356, 365

(3d Cir. 2016). Such complications include “(1) the difficulty courts {and litigants)

would have in parsing how much of the harm caused by supracompetitive prices

charged by an antitrust violator was incurred by the direct purchaser as opposed to

being passed down to indirect purchasers;” “(2) the possibility that multiple lawsuits

could result in inconsistent adjudications of liability or could result in an antitrust

violator paying more than the injury it actually inflicted once both direct and indirect

purchasers obtained recovery;” and “(3) the deleterious effect that the combination of

uncertainty around damages and the likelihood that each individual indirect

purchaser's share of damages would be small would have on the incentive for private

parties to initiate suits.” Id.

Balancing these concerns, the Supreme Court concluded that more effective

enforcement of antitrust laws would be achieved by allowing antitrust suits only to be

filed by direct purchasers. Illinois Brick, 431 U.S. at 734.

21

Since Illinois Brick, the Supreme Court has reaffirmed the “bright line”

quality of the direct purchaser rule. See UtiliCorp, 497 U.S. at 213-14;!9 see

also McCarthy, 80 F.3d at 848 (interpreting UtiliCorp, Mlinois Brick, and

Hanover Shoe as “enunciating a bright-line rule that only a purchaser

immediately downstream from the alleged monopolist may bring an antitrust

action.”).

“When determining whether a plaintiff and defendant are involved in a

direct purchaser/seller relationship, courts look to the ‘economic substance of

the transaction,’ rather than the physical attributes of the transaction or the

geographical movement of goods and services.” Animal Sci. Prods., 34 F. Supp.

3d at 500 (citing Hess I, 424 F.3d at 373 (finding that plaintiffs-purchasers did

not become direct purchasers from a manufacturer who drop-shipped products

to them because “the dealers still make the sale to [the] Plaintiffs and [the

manufacturer] makes the sale to the dealers.”)); see also Warren Gen. Hosp. v.

Amgen Inc., 643 F.3d 77 (3d Cir. 2011).

13 In UtiliCorp, several public utilities sued a pipeline company and natural gas

producers, alleging that the defendants conspired to inflate the price of the natural gas

supplied to public utilities. 497 U.S. at 204-05. This fuel was bought by a utility and

the entire cost was passed on to consumers. Id. The states of Kansas and Missouri,

acting as parens patriae, asserted the same claims on behalf of all persons residing in

those states who purchased the gas. Id. at 204. The defendants argued that the utility

companies (the direct purchasers of the gas) lacked standing to bring suit because

state and municipal regulations ensured that the utility companies had “passed on”

the alleged overcharge to their customers. Id. at 205. The states argued that the

residential customers should have standing to bring suit because the customers bore

the full cost of the price-fixing conspiracy. Jd, at 208.

The Supreme Court acknowledged that “the rationales of Hanover Shoe and

Illinois Brick may not apply with equal force in all instances” but held that it was

“inconsistent with precedent and imprudent in any event to create an exception for

regulated public utilities.” Id. The Court rejected Kansas’s claim, explaining that the

consumers were “not the immediate buyers from the alleged antitrust violators” and,

instead, they “bought their gas from the utilities, not from the suppliers said to have

conspired to fix the price of gas.” Jd. at 207. Essentially, it was the utility that had the

right to sue the suppliers for antitrust violations and allowing the utility’s customers

to also sue the suppliers would risk multiple recoveries and create difficult

apportionment problems. Jd. at 207, 212.

22

Recently, the Court of Appeals in Warren, 643 F.3d at 79, 88, reaffirmed

the importance of considering “the mechanics of the transactions” at issue to

determine who is the direct purchaser. There, a pharmaceutical manufacturer

would sell its products to wholesalers, who in turn would resell those products

to the member hospitals. The Court affirmed the district court’s decision that

the hospital-plaintiff lacked standing to assert a claim against the

pharmaceutical manufacturer.

In particular, the Court noted the following qualities of the transaction:

(1) the hospital places an order through the wholesaler; (2) the wholesaler

negotiates the final sales price of the products separately with the hospital; (3)

the hospital physically takes delivery of the shipment from the wholesaler; and

(4) the hospital pays the wholesaler directly, and does not transmit funds to the

manufacturer. Id. at 88. Thus, the hospital’s purchases “go through at least

one other stage in the chain of distribution” before reaching the hospital, and

the hospital was thus an indirect purchaser that lacked standing. Id.; see also

In re Hypodermic Prods. Antitrust Litig., 484 F. App’x 669, 675 (3d Cir. 2012)}.'4

A similar action has been brought against BMS in the Northern District

of Illinois that alleged a horizontal price-fixing conspiracy based on the same

operative facts and among the same software providers, BMS, Epiq, and TES.

See McGarry & McGarry, LLP v. Bankr. Mgmt. Sols., Inc., 2017 U.S. Dist. LEXIS

14 The Third Circuit in In re Hypodermic Prods. Antitrust Litig., 484 F. App’x at

675, essentially recognized the same factors. In that case, plaintiffs were the

distributors of defendant’s hypodermic products and certain healthcare providers that

purchased defendant’s products. Id. at 670-71. In concluding that the healthcare

providers, unlike the distributors, were not the direct purchasers, the Court noted

that:

(1) when Healthcare Providers needed hypodermic products, they placed

orders through Distributors; (2) Distributors negotiated the final sales

price of the hypodermic products separately with the Healthcare

Providers; (3) Distributors physically shipped the products to Healthcare

Providers; and (4) Healthcare Providers paid Distributors directly and did

not transmit funds to [defendants].

Id. at 675 (alteration added).

23

93133, *1-4 (N.D. Ill. June 16, 2017).!5 In McGarry, the trustee entered into a

contract with BMS, but the estate paid for the services. 2017 U.S. Dist. LEXIS

93133, at *6 n.7. The creditor-plaintiff argued that the estate was the “direct”

purchaser of the bankruptcy software because “the estate paid for the

services.” Id. BMS argued, as it does in this case, that the trustee or the bank

was the “direct purchaser.” The court did not expressly decide which entity was

the direct purchaser of the bankruptcy software. It concluded, however, that if

the estate was the direct purchaser, then it “owned any antitrust claim and

was entitled to one hundred percent of any overcharge.” To allow the creditor to

bring an antitrust claim, the court held, could subject BMS “to multiple

liability.” Id. at *6.

The court further noted that “the estate was injured by the overcharge: it

had less in assets than before.” To the extent that the estate was solvent after

satisfying creditors, the remaining assets would be returned to the debtor. Id.

at *8. “If BMS overcharged a solvent estate, fewer assets would return to the

debtor.” Jd. In passing, the court also noted that 11 U.S.C. § 350 permits any

interested party to move to reopen an estate, and that “a debtor may petition to

reopen an estate specifically to investigate a potential antitrust claim.” Id. at *7

(citing In re Indus. Marine Diesel, Inc., 1997 WL 33474937, at *4 (Bankr. S.D.

Ga. Jan. 31, 1997) (granting debtor’s motion to reopen an estate to allow

debtor to pursue an antitrust claim that was based on facts discovered after

the bankruptcy case had closed)}. Additionally, the court pointed out, “as a

trustee in bankruptcy owes a fiduciary duty to an estate’s creditors, . . . the

trustee could ‘pursue the debtor’s claim against the defendant on behalf of all

the debtor’s creditors equally, without preference for any particular creditor.”

Id. at *9; see also McGarry & McGarry LLP v. Bankr. Mgmt. Sols., 2018 U.S.

Dist. LEXIS 110264, at *6-7 (N.D. Ill. July 2, 2018) (“Because, according to

15 The facts of this case are practically indistinguishable from the McGarry matter,

except that the plaintiff in McGarry was a creditor of the estate. I observe that

plaintiff's counsel in this matter represented the creditor/ plaintiff in McGarry.

Plaintiff's counsel also represented one of Fusari’s creditors in this case.

24

McGarry, the Integrated estate was the direct purchaser, this court held that

the estate, through its trustee, was the proper party to bring an antitrust

claim.”).

Finally, Spinner, as a putative class representative, “cannot rely on the

direct purchases of other class members to establish its own standing.” Animal

Sci. Prods., 34 F. Supp. 3d at 502 (citation omitted). At this stage, Spinner

“must establish its own standing, either through its own direct purchases or

through the direct purchases of some entity that validly assigned its claims to

[Spinner].” Id. at 503.

iii, Analysis

This matter does not involve the typical horizontal price-fixing allegation.

In the ordinary case, a product goes through a chain of distribution that

includes three key players: the manufacturer; the distributor; and the

consumer, who ultimately receives and uses the product. In this case, however,

the mechanics of the transaction are as follows.

On June 8, 2015, Gamza, solely in his capacity as the trustee of the

Fusari estate, entered into a contract with BMS. (Compl 4950-51; DE 23-1).'6

Gamza, who was identified as the “Client” in the contract, agreed to deposit the

funds of the Fusari estate in Rabobank. {Compl 451; DE 23-1, at 2, 7). The

agreement also granted “BMS, Bank, or Financial Institution . . . the right to

charge” Gamza’s account a “service fee” for combined banking and technology

services. (Compl 451; DE 23-1, at 2, 8). Throughout the agreement, it is clear

that BMS’s services were being provided directly to Gamza as the trustee.

On that same day, Gamza entered into a Trustee Deposit Agreement with

Rabobank, which authorized Rabobank to automatically withdraw a monthly

fee from the estate account. (Compl 952-53; DE 23-2, at 10 (“Rabobank may

16 Spinner has attached the contract between BMS and Gamza, a Software

Licensing Agreement, as an exhibit to its opposition. (DE 23-1). Spinner has also

attached the Trustee Deposit Agreement that was executed between Gamza and

Rabobank. (DE 23-2). Both documents were referenced in the complaint, and BMS

does not dispute the authenticity of the documents. (DRBr at 2-6). They are properly

considered on a 12(b)(6) motion. See Section Il, supra.

295

charge you a fee . . . a portion of which or all of which may be paid to BMS...

for providing technology services, case management and other banking related

services.”).!7 BMS was not a party to this separate contract between the bank

and Gamza. Prior to the closing of the bankruptcy case, Rabobank deducted

$15,627.98 in fees in accordance with the agreements. (Compl ff 55, 57).

The individual debtor and Spinner as the individual debtor’s assignee

were not at all involved in the direct exchange of BMS’s services for a fee.

Based on the mechanics of the transactions, Gamza, as the trustee, negotiated,

executed, and was bound by the agreements that governed the use of the

product at issue. Gamza executed the Licensing Agreement with BMS, used the

software, and arranged for its payment.

Any antitrust violation caused by the alleged price-fixing conspiracy

would have ultimately caused injury to the estate, and decreased the amount

of assets available for creditors, and ultimately for the debtor. Cf McGarry &

McGarry, LLC v. Rabobank, N.A., 847 F.3d 404, 406 (7th Cir. 2017) (noting that

bank fees would be deducted from the creditors’ “share of the distribution of

the bankrupt’s assets.”); see also 11 U.S.C. § 726 (setting forth order in which

property of estate is to be distributed). Additionally, the trustee, who is paida

percentage of funds from the estate, would also be harmed by the alleged

antitrust violation.

This matter is unique in that Gamza did not buy the product at issue for

his own personal use. He used the product at issue for the benefit of another,

the estate. He paid for the product using funds from the estate. And finally, he

entered into the contracts governing the transactions at issue solely in his

capacity as trustee of the estate.

Therefore, I conclude that the estate is the “direct purchaser,” and the

trustee, as the representative of the estate, is the proper party to bring this

17 Both the Licensing Agreement and the Trustee Deposit Agreement had anti-

assignment clauses, barring Gamza from assigning the agreement without BMS'’s prior

written approval. (DE 23-1, at 3, 116; DE 23-2, at 2).

26

antitrust claim. See 11 U.S.C. § 323. The trustee is in a fiduciary relationship

with the estate and has a duty to pursue claims on behalf of the estate. The

overcharge, to the extent that there was any, was suffered by the estate. To put

it another way, the trustee was making the purchase here. The trustee was the

party who, but for the alleged restraint on trade, would have negotiated in a

competitive market for the best price and terms that could be obtained on

behalf of the bankruptcy estate.

That injury was suffered only indirectly by the individual debtor (or the

creditors). The individual debtor is no more a “direct purchaser” than were the

creditors in McGarry.'8 Indeed, the creditors are upstream of the debtor; they

are entitled to a distribution, with the debtor receiving only the residue, if any.

See 11 U.S.C. § 726. To be sure, the amount of assets left in the estate may

ultimately be reduced by the amount paid for support services. And the

amount left over, in turn, affected the availability of funds for the settlement.

That effect, however, is indirect; it is a knock-on consequence of the direct

antitrust injury suffered by the trustee (on behalf of the bankruptcy estate).

Spinner is appropriately seen as occupying a position downstream of the

estate. Spinner received an assignment from the individual debtor, after the

bankruptcy proceeding concluded and the remaining assets of the estate re-

vested, Spinner as successor assignee stands in the shoes of the individual

debtor. It cannot have greater rights than the debtor did.

BMS’s motion to dismiss the complaint for lack of antitrust standing is

therefore granted. Because this dismissal is with prejudice, I do not address

BMS’s remaining arguments.

18 In another filing with this Court, Spinner recognized that the injury is more

directly felt by the estate: “The price fixing conspiracy that plaintiff challenges in this

action continues to drain many millions of dollars per year out of Chapter 7

bankruptcy estates, to the detriment of creditors across the United States.” (DE 28).

27

IV. Conclusion

For the reasons stated above, BMS’s motion to dismiss the complaint (DE

15) is granted. Since amendment of the complaint would be futile, this

dismissal will be entered with prejudice.

An appropriate order has been filed (DE 51) and remains in effect.

Dated: June 12, 2019

xlein McNulty : )

United States District Judge

28