Tyntec Inc. et al v. Syniverse Technologies, LLC

Middle District of Florida, flmd-8:2017-cv-00591

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9 PageID 21610 UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION TYNTEC INC., a Delaware Corporation and TYNTEC GROUP LTD. f/k/a Phoenix Spring Ltd., a United Kingdom Corporation, Case No. 8:17-CV-00591-SDM-SPF Plaintiffs, v. SYNIVERSE TECHNOLOGIES, LLC, a Delaware Corporation Defendant. DEFENDANT SYNIVERSE TECHNOLOGIES, LLC'S TRIAL BRIEF 9 PageID 21611 TABLE OF CONTENTS INTRODUCTION................................................................................................................... 1 THE FACTS ............................................................................................................................ 3 I. Industry Overview .................................................................................................. 3 II. Iris Wireless ............................................................................................................ 4 III. tyntec ....................................................................................................................... 5 THE LAW................................................................................................................................ 8 ARGUMENT ......................................................................................................................... 12 I. Syniverse Did Not Refuse to Deal with tyntec. .................................................... 12 II. There Is No Voluntary Prior Course of Dealing. .................................................. 15 III. There Is No Profitable Prior Course of Dealing. .................................................. 17 IV. Syniverse Had a Legitimate Business Purpose in Declining to Renew the Peering Agreements. ............................................................................................. 19 V. tyntec Cannot Prove Monopoly Power or Harm to Competition. ........................ 21 VI. tyntec's Tortious Interference Claims Fail on Similar Grounds. .......................... 22 CONCLUSION ..................................................................................................................... 23 i 9 PageID 21612 TABLE OF AUTHORITIES Page(s) Cases Aerotec Int'l, Inc. v. Honeywell Int'l, Inc., 4 F. Supp. 3d 1123 (D. Ariz. 2014) ...................................................................................13 ASAP Paging Inc. v. CenturyTel of San Marcos Inc., 137 F. App'x 694 (5th Cir. 2005) ......................................................................................18 Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) .......................................................................................................9, 10 Authenticom, Inc. v. CDK Global, LLC, 874 F.3d 1019 (7th Cir. 2017) .............................................................................................8 Ball Mem'l Hosp., Inc. v. Mut. Hosp. Ins., Inc., 784 F.2d 1325 (7th Cir. 1986) ...........................................................................................21 Christy Sports, LLC v. Deer Valley Resort Co., 555 F.3d 1188 (10th Cir. 2009) .........................................................................................12 Covad Commc'ns Co. v. BellSouth Corp., 374 F.3d 1044 (11th Cir. 2004) .........................................................................9, 10, 15, 19 DocMagic, Inc. v. Ellie Mae, Inc., No. 3:09-cv-4017, 2011 WL 871480 (N.D. Cal. Mar. 11, 2011) ......................................15 Duty Free Americas, Inc. v. Estee Lauder Companies, Inc 797 F.3d 1248, 1257 (11th Cir. 2015) ...............................................................................14 MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124 (9th Cir. 2004) ...........................................................................................13 Morris Commc'ns Corp. v. PGA Tour Inc., 364 F.3d 1288 (11th Cir. 2004) ................................................................................. passim Mr. Furniture Warehouse, Inc. v. Barclays Am./Commercial Inc., 919 F.2d 1517 (11th Cir. 1990) .........................................................................................22 Novell, Inc. v. Microsoft Corp., 731 F.3d 1064 (10th Cir. 2013) ................................................................................. passim ii 9 PageID 21613 Pac. Bell Tel. Co. v. Linkline Commc'ns, Inc., 555 U.S. 438 (2009) .............................................................................................................9 Realauction.com LLC v. Grant St. Grp., Inc., 82 So. 3d 1056 (Fla. Dist. Ct. App. 2011) .........................................................................23 Steward Health Care Sys., LLC v. Blue Cross & Blue Shield of Rhode Island, 311 F. Supp. 3d 468 (D.R.I. 2018).....................................................................................10 U.S. Anchor Mfg., Inc. v. Rule Indus., Inc., 7 F.3d 986 (11th Cir. 1993) ...............................................................................................21 United States v. Bridgewater Cmty. Ass'n, Inc., No. 8:12-cv-1087, 2013 WL 3285399 (M.D. Fla. June 27, 2013) ....................................22 Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) ................................................................................................... passim Waste Servs., Inc. v. Waste Mgmt., Inc., 283 F. App'x 702 (11th Cir. 2008) ....................................................................................23 WHDH-TV v. Comcast Corp., 186 F. Supp. 3d 107 (D. Mass. 2016) ................................................................................12 Statutes 15 U.S.C. § 2 .................................................................................................................... passim Other Authorities Areeda & Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶772 (3d & 4th ed. 2010-2018) ............................................................11 iii 9 PageID 21614 INTRODUCTION In this case, tyntec pursues one of the most extraordinary of antitrust theories of liability—a refusal to deal claim. It is an extraordinary claim because "as a general matter, the Sherman Act does not restrict the long recognized right of a trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to the parties with whom he will deal." Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 408 (2004). That right is not unqualified, but the Supreme Court has warned about the dangers of imposing antitrust liability even on monopolists in the refusal to deal context: Firms may acquire monopoly power by establishing an infrastructure that renders them uniquely suited to serve their customers. Compelling such firms to share the source of their advantage is in some tension with the underlying purposes of antitrust law, since it may lessen the incentive for the monopolist, the rival, or both to invest in those economically beneficial facilities. Enforced sharing requires antitrust courts to act as central planners, identifying the proper price, quantity, and other terms of dealing – a role for which they are ill suited. Id. at 407-08. In the context of refusal to deal claims, the Supreme Court went on to note that "[t]he cost of false positives counsels against an undue expansion of § 2 [of the Sherman Act]." Id. at 414. Thus, the Supreme Court has described refusal to deal claims as "at or near the outer boundary of § 2 [of the Sherman Act]." Id. at 409. As can be expected with exceptional claims (especially ones that lie at the very outer reaches of antitrust law), the Supreme Court and the Eleventh Circuit have required plaintiffs to come forward with extraordinary proof to support a refusal to deal claim. In particular, a plaintiff must show (beyond the traditional requirements of any monopolization claim) that the defendant refused, without any legitimate business justification, to continue a prior, voluntary and profitable course of dealing with the plaintiff. In other words, tyntec must show that 1 9 PageID 21615 Syniverse acted against its own economic interest and forsook short term profits for no legitimate business reason. As this Court has already observed, this is "not a close case." TRO Hr'g, 402:3-4. Indeed, tyntec's claims are fatally flawed for a number of independently sufficient reasons. First, Syniverse never refused to do business with tyntec. Syniverse simply sought to negotiate terms with tyntec that made economic sense given what each party brought to the table. To that end, Syniverse extended tyntec an opening offer based on the terms of its agreements with similarly situated customers, and Syniverse fully expected tyntec to engage in negotiations. In response, tyntec insisted upon free access to Syniverse's network and customers, refused to negotiate further, and filed this lawsuit. Second, there was no voluntary course of dealing between Syniverse and tyntec. tyntec acquired peering agreements that Syniverse had entered into with an unrelated corporate entity—Iris Wireless. There is no precedent anywhere permitting a plaintiff to assert a refusal to deal claim based on a prior course of dealing between the defendant and an unrelated third party. Third, any prior course of dealing must have been profitable. It is undisputed that the peering agreements tyntec acquired were not profitable at the time Syniverse sought to negotiate a new deal or new terms with tyntec. Fourth, even a monopolist is free to refuse to deal when that decision is based, even in part, on valid business concerns. As the Court found after the TRO hearing in this case, Syniverse had "legitimate" concerns regarding tyntec's acquisition of the peering agreements. Nothing has changed since then. Fifth, tyntec cannot demonstrate that Syniverse has monopoly power or that Syniverse's actions harmed competition in any relevant market. And sixth, tyntec's tortious interference claims go the way of its antitrust claims because 2 9 PageID 21616 Syniverse simply furthered its own valid business interests when it sought to negotiate new terms for a new agreement with tyntec. THE FACTS I. Industry Overview Although the wireless telecommunications industry is complicated, the facts on which tyntec's claims turn are not. Syniverse provides inter-carrier vendor ("ICV") services, which facilitate the transmission of SMS and MMS messages (or what users commonly refer to as text messages or texts) between licensed cellular telephone providers ("Carriers"). Carriers, such as AT&T or Verizon, have separate networks. Carriers use ICVs as one way to connect their separate networks together. So when an AT&T customer sends a message to a Verizon customer, an ICV like Syniverse will facilitate the delivery of the message. Consumers take this interoperability for granted, but Syniverse has heavily invested in the reliability and efficiency of its messaging services. Carriers want an ICV that can both deliver messages from their customers to a long list of other Carriers (i.e., they want an ICV that can provide them substantial "reach") and to police inbound text messages for SPAM messages. Syniverse has the ability to send messages to a long list of Carriers, both domestic and international. To be considered a legitimate ICV, a company must facilitate interconnectivity between Carriers (i.e. peer-to-peer or P2P interconnectivity). Syniverse's ICV service generates revenue by offering interconnectivity to Carriers (allowing Carriers' customers to send messages to different Carriers' customers) and Carriers pay Syniverse for this service. In addition to its contracts with Carriers, Syniverse also 3 9 PageID 21617 maintains connections with other companies that provide similar ICV services for the exchange of messages. These are called "peering" connections and are memorialized in "peering agreements." Such agreements allow Syniverse to connect its Carrier customers to Carriers that are customers of other ICVs, which—of course—Syniverse's Carrier customers demand. No regulatory or legal framework obligates Syniverse to offer particular commercial terms in its peering agreements. And not surprisingly, the commercial terms for these agreements— including pricing terms—have changed over time. II. Iris Wireless In 2004, Syniverse entered into a peering agreement with Iris Wireless, a company that provided ICV services to a variety of Carriers. Syniverse and Iris agreed not to charge each other for exchanging messages; this made sense because both parties had customers to whom the other's customers wanted to send messages. But over the next ten years, Iris collapsed. In 2012, Iris failed to pay one of its technology vendors, so the vendor shut off Iris's service. Iris's customers scrambled to migrate their messaging to more stable ICVs, such as Syniverse and SAP. Shortly thereafter, Iris terminated most of its employees, ended operations, and its messaging traffic virtually ceased. Thereafter, it passed only minimal messaging traffic. As Iris imploded, it left a trail of unpaid bills and default judgments against it. Ultimately, Iris lapsed into a dormant shell, with no physical assets, office locations, employees, financial statements, or customers. In 2014, pursuant to the terms of the parties' agreement, Syniverse elected to terminate its 2004 agreement with Iris because the terms no longer provided any benefit to Syniverse. Iris—or what remained of it—filed a suit against Syniverse seeking a temporary restraining 4 9 PageID 21618 order to keep the 2004 agreement in place. The Court denied the TRO and permitted Syniverse to terminate the 2004 agreement. Iris then amended its complaint to assert antitrust claims. See Iris Wireless, LLC v. Syniverse Techs., No. 14-cv-1741-JSM-TGM (M.D. Fla.). Syniverse made the business decision to settle the Iris litigation. Under the terms of the settlement, Iris agreed to pay Syniverse $200,000 and Syniverse and Iris entered into the 2015 Peering Agreements at issue here. The 2015 Peering Agreements had two-year terms (ending in April and May 2017) that could be renewed for successive one year periods. The Agreements were terminable by either party upon 90-days' notice prior to the end of the term. III. tyntec tyntec is a German company with most of its business in Europe. In 2014, tyntec began to strategize about entering the U.S. market. To that end, tyntec covertly assisted Iris in the negotiation of the 2015 Peering Agreements between Syniverse and Iris. Unbeknownst to Syniverse, tyntec then acquired the 2015 Iris Peering Agreements in mid-2016 through a complicated and opaque series of transactions involving several holding companies. Under the assignment agreement between tyntec's predecessor and Iris, tyntec's predecessor entity expressly disclaimed any prior debts or obligations of Iris under the 2015 Peering Agreements, agreeing to take only the benefits of the 2015 Peering Agreements prospectively. In August 2016, two months after tyntec obtained the agreements, Syniverse learned of the transfer. Syniverse had serious concerns, not the least of which was the mechanics of the transaction through which tyntec acquired the agreements. Those agreements were non- transferable without Syniverse's written consent unless there was a merger or an acquiring party purchased substantially all of Iris's assets. 5 9 PageID 21619 Laura Binion, Syniverse's General Counsel, sought further details about tyntec's acquisition of the agreements. tyntec responded with obfuscation. Syniverse received an "opinion letter" from Jennifer DeCurtis (a lawyer and the wife of Eddie DeCurtis, a tyntec executive). Ms. DeCurtis was retained by a company Syniverse had never heard of, and the letter raised more questions than it answered. Among other things, the DeCurtis letter indicated there had been a strict foreclosure of Iris's assets. So Syniverse again asked about the disposition of Iris's assets. In response, Syniverse received an email from Johnny Tarone, Iris's CEO, which stated (with no elaboration) that the 2015 Peering Agreements and an Iris peering agreement with SAP represented all of the assets of Iris at the time of assignment. Tarone's email also stated that there had never been a foreclosure of Iris, contradicting the DeCurtis letter. Syniverse remained uncertain whether Iris properly transferred the peering agreements to tyntec and whether the transfer without Syniverse's written consent violated the terms of the 2015 Peering Agreements. Rather than fight over the purported assignment of the agreements, Syniverse decided to exercise its contractual right to terminate the 2015 Iris Agreements and to instead consider whether new terms would be appropriate with its new counterparty tyntec. After providing notice as contemplated by the 2015 Iris Agreements, Syniverse remained open to exploring a business relationship with tyntec. The parties scheduled a meeting on January 27, 2017, so that Syniverse could learn more about tyntec and propose terms of a new agreement. In advance of the meeting, Syniverse employees put together a proposal for tyntec based on tyntec's customer list (two non-Carriers) and Syniverse's contracts with companies situated similarly to tyntec. On the other side, tyntec was already 6 9 PageID 21620 working on a lawsuit to file against Syniverse even before the January meeting took place. At the meeting, Syniverse offered tyntec a commercially reasonable price based on those market comparables. Instead of a counteroffer, tyntec demanded connectivity to all of Syniverse's customers for free. Syniverse made it clear that tyntec did not have a customer base that would justify a no-fee peering relationship. tyntec came back to Syniverse a few weeks later, stating that it signed an exclusive deal to provide ICV services for "ten wireless carriers." On a February 2017 conference call, tyntec emphasized these anonymous new Carrier customers and again demanded peering agreements identical to the 2015 Peering Agreements. Syniverse responded that it needed confirmation of the Carriers to change the terms of its proposal. tyntec refused to provide the identities of the Carriers. Notwithstanding tyntec's refusal to provide any information, Syniverse took steps to prepare a free peering agreement for tyntec as long as the messaging traffic was in balance and if tyntec demonstrated that it could actually offer Syniverse reach to the "ten Carriers" it claimed to have signed. Several weeks after the conference call, the head of Syniverse's messaging business (John McRae) met face-to-face with the President of tyntec's U.S. messaging business (Eddie DeCurtis) to discuss the deal. Based on that meeting, they both believed they were close to reaching agreement. But before the parties could reduce this potential agreement to writing, tyntec filed this lawsuit. tyntec's decision surprised Syniverse. Syniverse thought that a business deal was imminent. tyntec's DeCurtis agreed. He thought the lawsuit was a mistake and there was an acceptable deal to be made with Syniverse. tyntec's internal documents have since shown, however, that tyntec never intended to negotiate; it's plan all along was take-it-or-leave-it. 7 9 PageID 21621 Either Syniverse would provide tyntec with the free peering service tyntec wanted, or tyntec would sue. So they sued. THE LAW Sherman Act § 2 liability requires proof of both monopoly power over a relevant market and some form of exclusionary or anticompetitive conduct by the monopolist. Morris Commc'ns Corp. v. PGA Tour Inc., 364 F.3d 1288, 1294-5 (11th Cir. 2004). Although the Sherman Act embraces the long-recognized right of a business "freely to exercise [its] own independent discretion as to parties with whom [it] will deal," in rare cases a refusal to cooperate with rivals can constitute the requisite anticompetitive conduct needed for a violation of § 2. Trinko, 540 U.S. at 408. "The leading case for § 2 liability based on a refusal to cooperate with a rival. . . is Aspen Skiing." Id. In that case, as summarized by the Trinko Court: The Aspen ski area consisted of four mountain areas. The defendant, who owned three of those areas, and the plaintiff, who owned the fourth, had cooperated for years in the issuance of a joint, multiple-day, all-area ski ticket. After repeatedly demanding an increased share of the proceeds, the defendant canceled the joint ticket. The plaintiff, concerned that skiers would bypass its mountain without some joint offering, tried a variety of increasingly desperate measures to re-create the joint ticket, even to the point of in effect offering to buy the defendant's tickets at retail price. The defendant refused even that. Id. at 408-09 (emphasis added). The Supreme Court upheld a jury verdict for the plaintiff, reasoning that "[t]he jury may well have concluded that [the defendant] elected to forgo these short-run benefits because it was more interested in reducing competition." Id. at 409. Aspen—notable for its confluence of unique facts: e.g., the parties' long-running cooperation, the profitability of the joint ski pass, the defendant's refusal to accept compensation even at retail price—represents the high-water mark in § 2 cases for a refusal- 8 9 PageID 21622 to-deal theory. Id. at 409 ("Aspen Skiing is at or near the outer boundary of § 2 liability."); Authenticom, Inc. v. CDK Global, LLC, 874 F.3d 1019, 1026 (7th Cir. 2017). In the years following Aspen, courts have parsed that decision and reined in its loose ends. The Supreme Court has referred to the refusal-to-deal theory accepted in Aspen as a "limited exception" available in only "rare instances." Trinko, 540 U.S. at 409; Pac. Bell Tel. Co. v. Linkline Commc'ns, Inc., 555 U.S. 438, 448 (2009). Other courts have followed suit. See, e.g., Covad Commc'ns Co. v. BellSouth Corp., 374 F.3d 1044, 1049 (11th Cir. 2004) (echoing that the Supreme Court's jurisprudence "requires us" to consider if refusal-to-deal allegations fit under the "limited exception" of Aspen); Novell, Inc. v. Microsoft Corp., 731 F.3d 1064, 1074 (10th Cir. 2013) (Gorsuch, J.) (calling refusal-to-deal claims "rare" and "somewhat. . . controversial"). From Aspen, the courts have distilled the elements for a refusal to-deal claim. Prior, Voluntary Course of Dealing. As the Aspen Court noted, in that case "the monopolist did not merely reject a novel offer to participate in a cooperative venture." 472 U.S. 585, 603 (1985). "Rather, the monopolist elected to make an important change in a pattern of distribution that had originated in a competitive market and had persisted for several years." Id. That requirement has calcified in the case law, especially for the Eleventh Circuit, which has expressly held a prior, voluntary course of dealing to be an indelible requirement for a refusal-to-deal claim. Covad Commc'ns Co. v. BellSouth Corp., 374 F.3d 1044, 1049 (11th Cir. 2004) ("Trinko now effectively makes the unilateral termination of a voluntary course of dealing a requirement for a valid refusal-to-deal claim under Aspen."); see also Trinko, U.S. 398 at 409 (holding plaintiff could not sustain refusal to deal claim where complaint did not allege defendant "voluntarily engaged in a course of dealing with its rivals"); Novell, 731 F.3d 9 9 PageID 21623 at 1074 ("[A]s in Aspen, there must be a preexisting. . . course of dealing between the monopolist and rival.").1 Profitable Prior Course of Dealing. Likewise, it is now well-established that the prior voluntary business venture must have been at least "presumably profitable." Trinko, 540 U.S. at 409. A monopolist's refusal to re-engage in a prior, voluntary, and profitable course of dealing evinces the monopolist's anticompetitive bent: it is willing to forego short-term profits to suppress competition. For example, in Aspen, the defendant refused to sell its services to a competitor, even at retail price. Aspen, 472 U.S. at 593; see also Novell, 731 F.3d at 1074-75 (explaining that there must be a "presumably profitable course of dealing between the monopolist and rival"); Covad, 374 F.3d at 1048 (contrasting Covad defendant's reluctance to provide services at cost—which "does not support an inference of monopolistic intent"— against Aspen defendant's refusal to sell services at its retail price). It was this refusal to sell services even at retail prices set by the defendant (presumably with an eye towards profitability) that was important to both the Tenth Circuit and the Supreme Court in Aspen and was part of the unique factual circumstances in that case. Lack of Legitimate Business Reason. The critical question before the Aspen Court was whether the record supported the conclusion that "valid business reasons exist for [defendant's] refusal," which would have immunized the defendant from antitrust liability. Aspen, 472 U.S. at 605. Following Aspen, courts have universally recognized that "[e]ven a 1 Against the overwhelming weight of this binding precedent, tyntec draws heavily on Steward Health Care Sys., LLC v. Blue Cross & Blue Shield of Rhode Island, 311 F. Supp. 3d 468 (D.R.I. 2018). There, the district court boldly proclaimed that the Eleventh Circuit, and several other federal courts of appeal (including the Tenth Circuit in its Novell opinion authored by now-Justice Gorsuch), either "misread or deliberately extend[ed] the holdings" of Aspen Skiing and Trinko. tyntec's reliance on this outlier district court decision in Rhode Island is telling. 10 9 PageID 21624 company with monopoly power has no general duty to cooperate with its business rivals and may refuse to deal with them if valid business reasons exist for such refusal." Morris, 364 F.3d at 1295 (compiling cases); Areeda & Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶772 (3d & 4th ed. 2010-2018) ("Aspen leaves monopolists free to refuse to deal or cooperate with rivals for legitimate business reasons."). That holds true "even if that refusal"—designed to further legitimate business purposes—"injures competition." Morris, 364 F.3d at 1295. * * * * * tyntec's claim is far afield from this established body of law. Unable to fit the facts of this case within the contours of a refusal-to-deal claim, tyntec is asking this Court to do what the Supreme Court has refused to do since Aspen: make new law in this area.2 Specifically, tyntec would have this Court abrogate three decades of Supreme Court and Eleventh Circuit precedent requiring a voluntary, profitable prior course of dealing between the alleged monopolist and its rival in a refusal-to-deal case. In its place, tyntec advances a breathtaking expansion of Section 2 of the Sherman Act, arguing that:  A plaintiff may acquire an agreement between the defendant and a third-party, disclaim any liability or obligations for the past course of dealing under that agreement, but then assert that it had a "prior voluntary course of dealing" with the defendant and pursue a refusal to deal claim—ignoring the fact that the entry of a new party into an existing agreement creates its own, legitimate business concerns.  A defendant can be liable for a refusal to deal even though it never refused to do business with the plaintiff and, instead, simply sought to negotiate new and more financially advantageous terms (itself a legitimate business goal) to get out from under an undisputedly unprofitable arrangement. 2 See Novell, 731 F.3d at 1074 ("Since Aspen, the Supreme Court has refused to extend liability to various other refusal to deal scenarios, emphasizing that Aspen represents a 'limited exception' to the general rule of firm independence."). 11 9 PageID 21625  A defendant can be held liable for refusal to deal if it does not give a rival access to its network or customers for free or on terms preferred by the rival. This Court should decline tyntec's invitation to extend antitrust liability under a refusal- to-deal theory beyond the precarious position it already occupies "at or near the outer boundary of § 2." Trinko, 540 U.S. at 409. ARGUMENT I. Syniverse Did Not Refuse to Deal with tyntec. At the outset, tyntec's claim fails because Syniverse never refused to deal with tyntec. After exercising its contractual right to let the 2015 Peering Agreements lapse, Syniverse extended an opening offer to tyntec for new peering agreements. tyntec did not like those terms and initiated this lawsuit. That is not a refusal to deal, and tyntec's arguments to the contrary fail: First, Syniverse's decision not to renew the 2015 Peering Agreements was not a refusal to deal. As a factual matter, Syniverse merely terminated the 2015 Peering Agreements—as was its right under the agreements—and instead attempted to renegotiate new agreements because tyntec was not a party to the original agreements. Termination of a commercial relationship "cannot be construed as anticompetitive" where the parties are simply exercising the rights they bargained for in a contract. WHDH-TV v. Comcast Corp., 186 F. Supp. 3d 107, 115 (D. Mass. 2016) (finding "refusal to engage in renewal negotiations does not, as a matter of law, amount to monopolistic exclusionary conduct" where plaintiff had bargained for contract with automatic expiration date and no right of first refusal); see also Christy Sports, LLC v. Deer Valley Resort Co., 555 F.3d 1188, 1193-96 (10th Cir. 2009) (no Section 2 liability where ski resort owner ended a 15-year relationship with its ski rental facility by invoking its 12 9 PageID 21626 right to exercise a restrictive covenant in the existing contract). Syniverse's decision to pursue a new agreement was also motivated by tyntec's failure to adequately explain how it acquired the 2015 Peering Agreements. Syniverse's concerns about the assignment of those agreements were well-founded, as tyntec acknowledged internally and as this Court previously held. See TRO Hr'g, 403:22-404:6 (noting Syniverse's "legitimate. . . business concerns with regard to the assignment"). Second, the parties' failure to reach a new agreement was not due to any refusal to deal by Syniverse. Far from refusing to engage with tyntec, on January 27, 2017 Syniverse offered tyntec a new agreement on terms that reflected tyntec's customer base at the time—two small Non-Carriers—and was in line with Syniverse's messaging agreements with other, similarly situated customers. Prior to extending the offer, Syniverse reviewed its contracts for customers similar to tyntec to ensure the offer was consistent with those contracts. For these reasons alone, tyntec's refusal to deal claim fails. Aerotec Int'l, Inc. v. Honeywell Int'l, Inc., 4 F. Supp. 3d 1123, 1138 (D. Ariz. 2014), aff'd, 836 F.3d 1171 (9th Cir. 2016) ("[C]ourts are loathe to interfere when the claim is that the defendant is actually dealing, but only on disadvantageous or onerous terms." (citation omitted)); MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124, 1134 (9th Cir. 2004) (no claim when monopolist "has not refused to deal. . . on the same terms that it deals with direct consumers"). Moreover, the January 27 offer was an opening offer. The undisputed record shows that Syniverse was willing to consider alternative arrangements and to work with tyntec in other areas if tyntec could bring value to the relationship. And the lead negotiators for both Syniverse and tyntec believed they could have reached an agreement if tyntec delivered on its 13 9 PageID 21627 promise of signing up Carrier customers. In the end, the parties did not reach a final agreement because tyntec refused to consider anything other than free peering and decided to file this lawsuit rather than continuing negotiations. Third¸ Syniverse did not (as tyntec suggests) engage in a "practical refusal to deal" by failing to offer tyntec its preferred contractual terms. The Eleventh Circuit has never recognized that pricing terms can amount to a "practical" refusal to deal. And the Eleventh Circuit's Duty Free Americas, Inc. v. Estee Lauder Companies, Inc. decision indicates that it would not be receptive to such a theory. In Duty Free Americas, Estée Lauder, the largest manufacturer of beauty products sold in duty free retail outlets in the U.S., decided to eliminate a discount that it had previously provided exclusively to duty free operators. 797 F.3d 1248, 1257 (11th Cir. 2015). The change in pricing was universally condemned throughout the duty- free industry as an affront to the duty-free business model (i.e., selling luxury products at discounted prices to outbound international travelers). Id. at 1257, 1267. But when Duty Free Americas ("DFA") quit offering Estée Lauder products in its stores and sued Estée Lauder under the Sherman Act, the Eleventh Circuit held there was no refusal to deal and particularly focused on that fact that it was DFA who initially terminated the relationship. Id. The court never once suggested that Estée Lauder may have "practically refused to deal" by demanding that DFA accept terms so onerous that they challenged DFA's very business model.3 That result makes sense – it is always within a company's legitimate business interests 3 Similarly, the Eleventh Circuit in Morris Communications weighed in on a refusal to deal claim but never considered whether to expand the doctrine to create a practical refusal to deal claim. See Morris Commc'ns Corp. v. PGA Tour, Inc., 364 F.3d 1288 (11th Cir. 2004). There the Eleventh Circuit simply concluded that demands that a plaintiff should receive free services did not create a §2 monopolization claim. 14 9 PageID 21628 to seek a higher price for its products or services. If courts were to suddenly analyze pricing offers to determine whether the defendant was asking for "too much," they would fall into the very trap the Supreme Court warned against: No court should impose a duty to deal that it cannot explain or adequately and reasonably supervise. The problem should be deemed irremedi[able] by the antitrust law when compulsory access requires the court to assume the day-to- day controls characteristic of a regulatory agency. . . The Sherman Act is indeed the 'Magna Carta' of free enterprise, but it does not give judges carte blanche to insist that a monopolist alter its way of doing business whenever some other approach might yield greater competition. Trinko, 540 U.S. at 415. This trap is particularly dangerous because "[t]he cost of false positives counsels against an undue expansion of § 2 liability." 4 Id. at 414. II. There Is No Voluntary Prior Course of Dealing. Syniverse and tyntec never had an ICV relationship prior to tyntec foisting itself upon Syniverse through its acquisition of the 2015 Peering Agreements. And the relationship between Syniverse and tyntec that ensued from tyntec's acquisition was not voluntary; Syniverse never consented to doing business with tyntec and only found out about the acquisition months after it occurred. Accordingly, tyntec's claims fail to satisfy this bedrock requirement of a refusal-to-deal claim. To overcome this glaring and fatal defect in its claim, tyntec repeatedly conflates itself with Iris Wireless, arguing that the Court may simply substitute tyntec for Iris in analyzing 4 But even if the Eleventh Circuit were willing to disregard the Supreme Court's cautions and entertain a "practical" refusal-to-deal claim, the record is undisputed in this case that Syniverse offered tyntec pricing competitive with other similarly situated companies, so that claim would fail here. In the past, tyntec has cited DocMagic, Inc. v. Ellie Mae, Inc., No. 3:09-cv-4017, 2011 WL 871480, at *1 (N.D. Cal. Mar. 11, 2011), an unreported district court opinion from outside the Eleventh Circuit as support for its practical refusal to deal argument. That case obviously does not dictate the result in this one. But in that case, the court explained that plaintiff "cannot proceed on a refusal to deal theory if it made no efforts to renegotiate" the relevant agreement— which would foreclose tyntec's claim here. 15 9 PageID 21629 whether there was a refusal to deal. But no court has ever held that an entirely new party that was assigned a preexisting contract is entitled to pursue a refusal to deal claim, and for good reason. The "prior course of dealing" requirement exists to "advance[] the larger principle that unadulterated unilateral conduct—situations in which no course of dealing ever existed— won't trigger antitrust scrutiny." Novell, 731 F.3d at 1074. Additionally, requiring that the parties previously and voluntarily entered into a commercial relationship with one another "helps address. . . administrability concerns." Id. at 1075. If the parties earlier agreed to do business together, they presumably did so on profitable terms absent changed circumstances; if the court has to fashion a remedial order, it can rely on the parties' previous freely negotiated terms knowing full well they are mutually beneficial to both sides. Id. at 1074-75. But allowing a stranger to the contract to assert a claim for refusal-to-deal based on a third party's relationship with the defendant would subvert both rationales for the prior course of dealing requirement. Not only would it impose liability for purely unilateral conduct, it would also do nothing to ease the court's administrability burden. There is no guarantee that profitable terms between the monopolist and original contracting party would be profitable as applied to the monopolist and the contract outsider, leaving the court with no guidance as to how to fashion a fair remedy.5 5 In response, tyntec merely points to case law standing for the general propositions that: (1) when a contract is assigned, the assignee may enforce contractual provisions and (2) parties can assign causes of action. That case law is of no moment here, where the issue is whether tyntec can rely on Syniverse's commercial relationship with Iris for purposes of establishing the necessary "prior course of dealing" for a refusal to deal claim. The reason for the requirement is to avoid imposing liability where a monopolist exercises its fundamental right of free choice in the marketplace in deciding not to do business with a party it has never dealt with before. Allowing an assignee of a contract, who is otherwise a stranger to the commercial relationship, to bring a refusal-to-deal claim undermines this rationale, regardless of whether the assignee has the right to enforce a provision of the contract or not. This issue is currently the subject of a Motion in Limine pending before the Court. See Dkt. 183. 16 9 PageID 21630 Even if tyntec could rely on the prior course of dealing with Syniverse and Iris, the record shows that the Syniverse-Iris ICV relationship was virtually non-existent and unprofitable by 2012. In 2012, Iris suffered an outage to its network and the vast majority of its few remaining customers migrated to more stable ICVs like Syniverse and SAP. After the outage, Iris essentially ceased operations, terminated its workforce, and passed only minimal messaging traffic. The result was a "peering relationship" between Iris and Syniverse where Iris passed virtually no messaging traffic and was not operating as an ICV. As a result, Syniverse chose to terminate its agreement with Iris in 2014, ending any previous course of dealing between them. Accordingly, tyntec cannot rely on this prior course of dealing between Iris and Syniverse. And although Syniverse and Iris entered into new peering agreements in 2015, Iris continued to pass only minimal messaging traffic for a single non-Carrier customer before assigning the 2015 Peering Agreements to tyntec less than a year later. tyntec should not be able to invoke this short-lived, minimal, and unprofitable relationship between Syniverse and Iris as the basis for its own voluntary course of dealing. III. There Is No Profitable Prior Course of Dealing. Nor can tyntec show that any prior course of dealing was profitable for Syniverse, providing an independent ground to find in favor of Syniverse. See, e.g., Novell, 731 F.3d at 1074-75 (requiring under Aspen Skiing that "there must be a preexisting voluntary and presumably profitable course of dealing between the monopolist and rival" and that the monopolist's discontinuation of the preexisting course of dealing must "suggest a willingness to forsake short-term profits to achieve an anti-competitive end"). tyntec's own expert has conceded that the commercial relationship was not a profitable arrangement for Syniverse. 17 9 PageID 21631 Simply put, the costs associated with servicing tyntec's messaging traffic and onboarding any new messaging customers outstripped any revenues associated with the peering relationship. As Syniverse was clearly not engaged in profit-sacrificing behavior—both in not renewing the peering arrangement and with its pre-litigation negotiations—tyntec's refusal-to-deal claim fails. Morris, 364 F.3d at 1296 (dismissing refusal-to-deal case because § 2 of the Sherman Act "does not require [a defendant] to give its product freely to competitors"); ASAP Paging Inc. v. CenturyTel of San Marcos Inc., 137 F. App'x 694, 698-99 (5th Cir. 2005) (affirming dismissal without any allegation that prior arrangement between the parties was agreed to and profitable). tyntec's post hac attempt to create evidence of profitability by extending an offer to pay Syniverse $3,400 per month to cover Syniverse's "costs of peering with tyntec" after the initiation of this lawsuit fails. First tyntec's offer effectively concedes that Syniverse had unreimbursed costs it was not recovering under the 2015 Peering Agreements when they were in force, providing further support that the arrangement was not profitable for Syniverse at the time Syniverse elected not to renew the Agreements. Second, the offer (made in April 2018) does not retroactively make the 2015 Peering Agreements profitable at the time Syniverse decided not to renew them. Third, Syniverse is not required to do business with tyntec on terms that would merely ensure that Syniverse "breaks even." Moreover, there was no certainty that Syniverse could break even given that tyntec wanted unlimited access to Syniverse's customers in exchange for a single, fixed monthly payment. See, e.g., Covad, 374 F.3d at 1048 (noting Aspen's requirement of a profitable course of dealing and holding that defendant's reluctance to provide services at cost "does not support an inference of 18 9 PageID 21632 monopolistic intent").6 IV. Syniverse Had a Legitimate Business Purpose in Declining to Renew the Peering Agreements Under Identical Terms. tyntec's claim also fails on the facts, because legitimate business reasons drove Syniverse's decisions with respect to the tyntec negotiation. See, e.g., Morris, 364 F.3d at 1295 ("[R]efusal to deal that is designed to protect or further the legitimate business purposes of a defendant does not violate the antitrust laws, even if that refusal injures competition."); Novell, 731 F.3d at 1075 ("Put simply, the monopolist's conduct must be irrational but for its anticompetitive effect."). tyntec has not (and cannot) effectively rebut Syniverse's legitimate business justification, and therefore fails to meet its own burden in proving its claims. Morris, 364 F.3d at 1295 ("Once the defendant has met its burden to show valid business justification, the burden shifts to the plaintiff to show that the proffered business justification is pretextual."). Despite tyntec's attempts to recharacterize the facts, nothing has changed since the Court found at the TRO hearing that Syniverse had "a legitimate business reason for seeking to undo the contractual arrangements and for terminating the peering agreements." TRO Hr'g Tr. 400:18- 24. Discovery has confirmed that Syniverse's suspicions about tyntec were well-founded. Syniverse had several legitimate business reasons to exercise its right to terminate the 2015 Peering Agreements: tyntec was a stranger to the agreements; tyntec could not provide a straight answer when asked (repeatedly) how it acquired the agreements; and tyntec's legal 6 Nor does tyntec's 2018 agreement with Philippines-based wireless carrier Globe or tyntec's participation in a customer-bid process with Sprint—both of which occurred during the pendency of this litigation—retroactively make the 2015 Peering Agreements a profitable endeavor for Syniverse at the time Syniverse elected not to renew them and to seek new agreements with new terms with tyntec. This evidence is currently the subject of a Motion in Limine pending before the Court. See Dkt. 189. 19 9 PageID 21633 "opinion letter" explaining the agreements—written by the wife of the President of tyntec's U.S. operations and retained by an LLC Syniverse had never heard of—raised many more questions than it answered. Further, Syniverse's proposals of terms to tyntec and attempts to negotiate with tyntec were tailored to tyntec's traffic and customer base. Syniverse remained open to further negotiating terms with tyntec if tyntec would simply provide more information regarding the "new carriers" with which tyntec claimed to have contracts. But tyntec refused to provide that information (and discovery since has shown that tyntec misrepresented this fundamental fact). As Judge Lazzara recognized at the TRO hearing, "I can understand why [Syniverse] needs the names of the carriers, you know. [Syniverse] has to do [its] due diligence. . . . But for whatever reason, [t]yntec said, we will not give you those names." Id. at 405:8-13. Legitimate business reasons drove Syniverse's decisions. That was true at the TRO hearing and it is true now. Moreover, any claim that this business justification is pretextual fails. tyntec primarily relies on a single email from a Syniverse employee, Niaz Alibhai, in arguing that Syniverse's decision was really driven by anticompetitive motive. In that email, Alibhai writes: Back in January I had sent a pricing proposal for Tyntec hub agreement. I am not in agreement to give +1 to +1 free that is 99.5% of their traffic and direct threat for them to take our customers. They have done this in the past and will continue to do so. There is no financial gain for us to sign them up as they would be more dependent on us for reach and with that comes high overhead. Ex. 7 to Pls.' MSJ, Dkt. S116 (emphasis added). But this email supports Syniverse's position, showing that Syniverse would not do business with tyntec on tyntec's terms because that would not be profitable for Syniverse. If trying to avoid an unprofitable deal is not a valid business justification, then nothing is. 20 9 PageID 21634 Further, tyntec, like the plaintiff in Morris Communications, seeks to latch onto Syniverse's technological infrastructure for free; that is, to make its profit off the back of Syniverse's investment in the reach of its network. But "[t]he prevention of free-riding, which is an inherently economic motivation, provides a valid business justification." Morris, 364 F.3d at 1298. Antitrust law does not require Syniverse to deal with tyntec on tyntec's preferred terms for reasons of tyntec's choosing. It instead requires that Syniverse have legitimate business reasons for its actions; that is, its actions must be economically rational. Discovery proved just that, so tyntec's antitrust claims fail. V. tyntec Cannot Prove Monopoly Power or Harm to Competition. Looking past tyntec's inability to establish anticompetitive conduct—i.e., a refusal to deal—tyntec's Section 2 claims fail for the additional independent reason that tyntec cannot establish monopoly power or antitrust harm. Monopoly power is "the power to raise prices to supracompetitive levels or. . . the power to exclude competition in the relevant market either by restricting entry of new competitors or by driving existing competitors out of the market." U.S. Anchor Mfg., Inc. v. Rule Indus., Inc., 7 F.3d 986, 994 (11th Cir. 1993). High market share alone is not necessarily indicative of monopoly power. Ball Mem'l Hosp., Inc. v. Mut. Hosp. Ins., Inc., 784 F.2d 1325, 1336 (7th Cir. 1986). Here, there is no evidence that Syniverse can raise prices to supra- competitive levels or control messaging prices. In fact, pricing for messaging has been steadily declining and Syniverse must deal with pricing pressures as a result of a highly competitive market. Syniverse also does not have the power to exclude competition. First, there is no evidence that Syniverse has ever excluded any competitors by refusing to enter into a 21 9 PageID 21635 messaging agreement with them. Nor could Syniverse do so. Syniverse's Carrier customers demand that Syniverse provide messaging connectivity to all other Carriers regardless of which entity they utilize for ICV services, so Syniverse must enter into agreements with other ICVs that have Carrier customers. Antitrust injury, meanwhile, requires harm to competition, not an individual competitor or consumer. Mr. Furniture Warehouse, Inc. v. Barclays Am./Commercial Inc., 919 F.2d 1517, 1522 (11th Cir. 1990). Accordingly, "[a] monopolist's refusal to deal becomes actionable under the antitrust laws only where the refusal is designed to have an anticompetitive effect [on the market], whether to gain greater market share, to drive up prices, or to obtain some other illegal goal." Id. tyntec's primary basis for claiming harm to competition is that without tyntec, there are only two competitors that provide ICV Services: Syniverse and SAP. Not only is that assertion factually incorrect, but tyntec has made no effort to prove that competition has been harmed in this case. tyntec's expert does not analyze whether there is a reduction in output, increase in prices, or a decrease in quality of messaging services. Without such evidence, there is no basis for finding actionable harm to competition. VI. tyntec's Tortious Interference Claims Fail on Similar Grounds. For its tortious interference claims, Florida law requires tyntec to show "both an intent to damage the business relationship and a lack of justification to take the action which caused the damage." United States v. Bridgewater Cmty. Ass'n, Inc., No. 8:12-cv-1087, 2013 WL 3285399, at *8 (M.D. Fla. June 27, 2013) (emphasis added). The same business reasons which bar tyntec's antitrust claims defeat tyntec's state-law claims. Moreover, tyntec's "contractual" relationships with Shelcomm, Flyp, and TNS upon which tyntec relies do not "afford [tyntec] 22 9 PageID 21636 existing or prospective legal or contractual rights" with which Syniverse could interfere. Waste Servs., Inc. v. Waste Mgmt., Inc., 283 F. App'x 702, 707 (11th Cir. 2008). First, tyntec has never sent Shelcomm an invoice and Shelcomm has made clear it has no intention to sue tyntec. Second, tyntec has no contract with Flyp, only a "handshake deal" to provide ICV services for free; tyntec had no obligation to provide service to Flyp. Third, tyntec's contract with TNS does not actually promise tyntec anything with respect to the services at issue in this case. It is axiomatic that "[s]peculative hope of future business is not sufficient to sustain the tort of interference with a business relationship." Realauction.com LLC v. Grant St. Grp., Inc., 82 So. 3d 1056, 1060 (Fla. 4th DCA 2011). Thus, tyntec's state-law claims fail. CONCLUSION The facts of this case simply do not support tyntec's refusal to deal claims. tyntec's tortious inference claims fare no better on the merits, and are further infirmed because the relationship at issue generated no revenue for tyntec. Respectfully submitted, /s/ Mark A. McCarty Mark A. McCarty (admitted pro hac vice) Mark.McCarty@alston.com John E Stephenson, Jr. (admitted pro hac vice) Valarie C. Williams (admitted pro hac vice) Kara Kennedy (admitted pro hac vice) James B. Cash (admitted pro hac vice) Anthony Greene (admitted pro hac vice) ALSTON & BIRD LLP 1201 W. Peachtree Street Atlanta, Georgia 30309 Tel.: 404-881-7000 Fax: 404-881-7777 23 9 PageID 21637 Benjamin H. Hill, III (FBN: 94585) Matthew F. Hall (FBN: 92430) HILL, WARD, HENDERSON, P.A. 101 East Kennedy Blvd. Suite 3700 Tampa, Florida 33602 Tel.: 813-221-3900 Attorneys for Defendant 9 PageID 21638 CERTIFICATE OF SERVICE I HEREBY CERTIFY that on November 26, 2018, I served the foregoing document, by electronic mail, upon the following counsel for the Plaintiffs: William Christopher Carmody (admitted Daniel P. Dietrich pro hac vice) Florida Bar No. 934461 Shawn J. Rabin (admitted pro hac vice) GUNSTER, YOAKLEY & STEWART, Jason C. Bertoldi (admitted pro hac vice) P.A. SUSMAN GODFREY L.L.P. 401 East Jackson Street, Suite 2500 1301 Avenue of the Americas, 32nd Floor Tampa, FL 33602 New York, NY 10019 (813) 739-6970 (212) 336-8330 ddietrich@gunster.com bcarmody@susmangodfrey.com srabin@susmangodfrey.com Stephen M. Medlock (admitted pro hac jbertoldi@susmangodfrey.com vice) MAYER BROWN LLP Vineet Bhatia (admitted pro hac vice) 1999 K Street, N.W. 1000 Louisiana, Suite 5100 Washington, D.C. 20006 Houston, TX 77002 (202) 263-3000 (713) 651-9366 smedlock@mayerbrown.com vbhatia@susmangodfrey.com Amanda Bonn (admitted pro hac vice) Meng Xi (admitted pro hac vice) 1900 Avenue of the Stars, Suite 1400 Los Angeles, CA 90067 (310) 789-3100 abonn@susmangodfrey.com mxi@susmangodfrey.com Additionally, per the parties' discussion and agreements regarding the sealing of documents, I hereby certify that in accordance with the Middle District of Florida's electronic filing procedures, this document has now been electronically filed on December 17, 2018. A Notice of Electronic filing will be sent by the Court to all counsel of record who have consented to e-mail notification and electronic service. This document is available for viewing and downloading from the Court's ECF system. /s/ James B. Cash Attorney for Defendant