TOTAL VISION LLC v. VISION SERVICE PLAN VSP VSP LLC VSP (2024)

ORDER GRANTING IN LIMITED PART AND DENYING IN SUBSTANTIAL PART DEFENDANTS’ MOTION TO DISMISS COMPLAINT [Dkt. 14]

I. INTRODUCTION

In this case, Plaintiffs Total Vision, LLC and Total Vision, P.C. (together “Total Vision”) allege that Defendant Vision Service Plan (“VSP”) and its co-Defendant affiliates engaged in extensive anti-competitive practices to monopolize optometry markets that harmed Total Vision's business. (See Dkt. 1 [Compl.].) Now before the Court is Defendants’ motion to dismiss the Complaint (Dkt. 14 [hereinafter “Mot.”]). For the following reasons, Defendants’ motion is GRANTED IN LIMITED PART and DENIED IN SUBSTANTIAL PART.¹

II. FACTS

Total Vision is a California business supporting independent optometry practices. (See Compl. ¶¶ 1, 16–17.) Total Vision, P.C. acquires and owns these optometry practices, and Total Vision, LLC provides administrative, nonclinical services to these practices. (See id. ¶¶ 2–3.) Meanwhile, “Defendant VSP is the largest vision insurer in the country,” commanding about 65% of the nationwide and California vision insurance markets, (see id. ¶¶ 45–48), and its “ubiquity in the vision insurance market makes it a ‘must have’ for [optometry] practices, which must be ‘in-network’ with VSP or else be unable to meaningfully compete in the independent optometry market,” (id. ¶ 1). Over the past two decades, VSP has expanded from just providing vision insurance to also owning independent optometry practices and selling glasses frames, lenses, and back-office optometry software. (See id.)

Given VSP's dominant presence in the vision insurance market, it has covered Total Vision's optometry practices for decades. (See id. ¶ 5.) And before Total Vision formed its network of optometry practices, VSP assured Total Vision's founders that its practices would remain in-network under Total Vision's operation. (See id. ¶¶ 55–56.) Based on these discussions, on May 22, 2019, Total Vision, LLC ² and VSP entered into a retail agreement (the “2019 Retail Agreement”), which provided terms for their business arrangement, such as payment of claims. (See id. ¶ 56.) The parties agreed that the contractual relationship would annually renew automatically, which was important to ensure Total Vision's patients would never lose access to VSP's network. (See id. ¶¶ 72–73.) But VSP's market dominance enabled it to force many harmful terms on Total Vision, LLC (and by association Total Vision, P.C.), including: a provision allowing VSP to deny coverage to optometry practices Total Vision acquired under particular circumstances (effectively limiting Total Vision's growth); another provision allowing VSP to deny coverage of any practice Total Vision acquired that increased its market penetration in any metropolitan service area above 30%; a requirement that Total Vision, LLC make commercially reasonable efforts to spend certain amounts on Marchon and Altair (entities owned by VSP) frames or to dedicate about half of each practice's board space to these frames, even though sales of these frames yielded less gross profits to Total Vision than other frames; a requirement that Total Vision, LLC make commercially reasonable efforts ensure at least 50% of lenses purchased for VSP-insured patients were Unity lenses, even though these lenses cost on average 56.8% more and are sometimes lower quality than Essilor, another brand of lenses available to Total Vision; and requirements to use Defendant VSP Labs, Inc.’s laboratories and Defendant Eyefinity, Inc.’s electronic health record solutions. (See id. ¶¶ 38, 55–66.) Additionally, VSP required that Total Vision, LLC obtain its consent for any changes in control of Total Vision. (See id. ¶¶ 67–68.)

Total Vision alleges that it would not have accepted these terms but for the need to ensure its providers remained in the VSP insurance network. (See id. ¶ 70.) These restrictive provisions harmed consumers in a variety of ways, from requiring them to pay more for needed products and services, to limiting their choices of products available for purchase. (See id. ¶¶ 55–71.) Around this time, VSP itself entered the independent optometry practice market—making it a direct competitor with Total Vision as well as the primary provider of its patients’ insurance coverage. (See id. ¶¶ 72–73.) VSP then acquired Defendant Visionworks, which, as of 2021, operated over 700 optometry locations in over forty states. (See id. ¶¶ 77–78.)

In 2020, the anti-competitive situation worsened when VSP removed Total Vision from its “Premier” program, the benefits of which include “more savings, more traffic to [participants’] practice, more exclusive patient offers,” and more “[e]xclusive partnerships with industry leading companies.” (Id. ¶¶ 79–80.) VSP claimed that it was removing all practices supported by non-doctor-owned companies (even though Total Vision's practices and doctors own equity in Total Vision), but this explanation was “plainly pretextual” since VSP did not remove Visionworks (which is notably owned by VSP) locations from the program. (Id. ¶ 81.) VSP informed Total Vision that the only way for Total Vision to remain on VSP's Premier program was for VSP to acquire or invest in Total Vision (in contradiction to its claim that non-doctor-owned companies were not eligible for the program). (See id. ¶ 82.)

On February 26, 2020, VSP sent Total Vision a notice of termination of the 2019 Retail Agreement, but noted that “in reality, VSP intends to continue [its] relationship with Total Vision while [working] to establish new terms,” which will likely result in a simple “amendment to the Retail Agreement.” (Id. ¶ 83 [cleaned up].) In following negotiations, VSP made clear that a prerequisite to continuing the parties’ business relationship was capping Total Vision's growth—i.e., limiting the number of practices that could join Total Vision and remain in-network with VSP. (See id. ¶ 85.) After Total Vision protested, VSP retaliated by informing Total Vision, LLC that “VSP would renew the Retail Agreement for one year, subject to a cap of 15 additional Total Vision practices, but that all of Total Vision's practices would be removed from VSP's insurance network after the proposed one-year renewal,” which would merely postpone the significant harm to Total Vision from losing in-network status with VSP. (Id. ¶ 86.)

Negotiations continued for months, and after an August 4, 2020 call, Total Vision, LLC sent a proposed amended retail agreement to VSP. (Id. ¶ 87.) On August 6, 2020, VSP responded that it intended to remove all of Total Vision's supported practices from VSP's provider network, and the next Monday on August 10, VSP informed Total Vision practices in writing that because of their affiliation with Total Vision, they were no longer eligible to participate in and would be removed from the VSP doctor network. (See id. ¶¶ 88–89.) VSP also called Total Vision's patients directly informing them that their care would no longer be in-network and encouraged them to take their business elsewhere. (See id. ¶ 89.) Total Vision, LLC was indeed removed from VSP's network on August 17, 2020, causing chaos among its practices and leading many patients to leave Total Vision practices. (See id.) This termination also impacted Total Vision's negotiations with forty-one additional independent practices seeking to join Total Vision; VSP was aware of these prospective relationships from information shared during the Retail Agreement negotiations. (See id. ¶¶ 92–93.)

In a state of turmoil, Total Vision, LLC at this point had no choice but to accept a new 2020 Retail Agreement with a three-year term and even more anticompetitive provisions. (See id. ¶ 96.) The 2020 Agreement capped the total number of in-network locations Total Vision could manage, required Total Vision to dedicate half of its board space to Marchon and Altair frames, required shortfall payments if Unity lenses did not make up at least 50% of a practice's lens sales, reduced doctors’ reimbursement rates, required VSP's consent for any change in control of Total Vision, required Total Vision to use particular electronic health record solutions, revoked Premier status from all Total Vision providers, and contained a one-sided release of claims. (See id. ¶¶ 96–107.) In short, that release provision (the “Release”) allowed VSP to bring enforcement claims arising out of the 2020 Agreement but purported to prevent Total Vision from ever challenging the Agreement. (See id. ¶ 107.) The Release also capped recoverable damages at $250,000 and allowed either party to recover all legal fees if any part of any claims brough in a lawsuit were found to be released. (See id. ¶¶ 108–09.) Total Vision insists that it agreed to these terms under duress. (See, e.g., id. ¶ 104.)

In 2022, VSP reminded Total Vision that its contract was “coming up for renewal” and that they needed to discuss how to keep Total Vision in network. (Id. ¶ 125.) During that call VSP expressed interest in purchasing Total Vision, and the parties executed a nondisclosure agreement after VSP assured a Total Vision shareholder that it was prepared to deal in good faith and pay a fair valuation for the business. (See id. ¶¶ 126–27.) Over months of negotiation, however, it became clear that VSP planned instead to use Total Vision's need to stay in-network and its upcoming contract renewal to pressure Total Vision to sell at a de minimis price. (See id. ¶ 128.) Typically VSP sent letters indicating the possibility of nonrenewal one year ahead of a potential contractual expiration, but instead, on December 12, 2022—just 7.5 months before the 2020 Agreement's expiration in September 2023—VSP notified Total Vision for the first time that if its contract was not renewed, Total Vision's providers would be removed from VSP's network. (See id. ¶ 129.) The letter also “emphasized VSP's right to withhold its consent to a sale of Total Vision to another bidder under the Agreement's change of control provision.” (Id. ¶ 130.)

When VSP finally made an acquisition offer in February 2023, its bid and accompanying valuation were “wildly below” all other estimates Total Vision had received. (See id. ¶ 131.) When Total Vision rejected this offer and sought to discuss renewal of the existing 2020 Agreement, VSP “went dark and stopped responding to Total Vision's requests entirely.” (Id. ¶ 132.) The next communication Total Vision received from VSP was a March 7, 2023 notice of nonrenewal. (See id. ¶ 133.)

In July 2023, Total Vision sent a letter demanding that VSP cease its anticompetitive behavior and requested that the parties agree on a solution to enable continued profitable dealings. (See id. ¶ 135.) In August, VSP denied engaging in anticompetitive behavior and reiterated that Total Vision's doctors would be removed from VSP's network. (See id. ¶ 136.) Total Vision filed this lawsuit on September 26, 2023 just before its contract with VSP terminated. According to Total Vision, the harms it has experienced are not unique; “VSP's conduct is market-wide.” (Dkt. 25 [Opp'n to Mot. to Dismiss, hereinafter “Opp.” at 6.)

III. LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of a plaintiff's claims. The issue on a motion to dismiss for failure to state a claim is not whether the plaintiff will ultimately prevail but whether the plaintiff is entitled to offer evidence to support the claims asserted. Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 249 (9th Cir. 1997). Rule 12(b)(6) is read in conjunction with Rule 8(a), which requires only “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). When evaluating a Rule 12(b)(6) motion, the district court must accept all material allegations in the complaint as true and construe them in the light most favorable to the non-moving party. Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1014 (9th Cir. 2012). To survive a motion to dismiss, a complaint must contain sufficient factual material to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Determining whether a complaint states a plausible claim for relief is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

IV. DISCUSSION

Defendants move to dismiss Total Vision's Complaint in its entirety. To begin, Defendants assert that the Release squarely forecloses Total Vision's lawsuit. Defendants then move for dismissal of each of Total Vision's causes of action for pleading deficiencies. And finally, Defendants argue that Total Vision impermissibly lumps all Defendants, aside from VSP, together in violation of Federal Rule of Civil Procedure 8, warranting dismissal of all those affiliated Defendants. The Court takes each argument in turn and agrees with Defendants only in limited part.

A. Release of Claims

A release is “[t]he relinquishment, concession, or giving up of a right, claim, or privilege, by the person in whom it exists ․ to the person against whom it might have been demanded or enforced.” Thomforde v. Int'l Bus. Machines Corp., 406 F.3d 500, 504 (8th Cir. 2005) (quoting Black's Law Dictionary). A covenant not to sue is “[a] covenant by one who had a right of action at the time of making it against another person, by which he agrees not to sue to enforce such right of action.” Id. “A release is a provision that intends a present abandonment of a known right or claim. By contrast, a covenant not to sue also applies to future claims and constitutes an agreement to exercise forbearance from asserting any claim which either exists or which may accrue.” Syverson v. Int'l Bus. Machines Corp., 472 F.3d 1072, 1084 (9th Cir. 2007) (quoting Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 55 n.4 (3d Cir. 2001)).

Tire Hanger Corp. v. Shinn Fu Co. of Am., Inc., 2017 WL 3457122, at *8 (C.D. Cal. June 7, 2017). Both are included here. The Release signed by Total Vision, LLC reads in relevant part:

The Parties, for themselves and their respective parent companies, subsidiaries, affiliated entities, predecessors, successors, assigns, officers, directors, shareholders, members, employees, attorneys and agents (“Releasing Parties”), release one another and the other's their respective parent companies, subsidiaries, affiliated entities, predecessors, successors, assigns, officers, directors, shareholders, members, employees, attorneys and agents (“Released Parties”), from any and all causes of action and claims for relief ․ [N]either party will directly, or indirectly through an Affiliate, Optometry Practice or Provider, commence any proceeding against the other Party during or after the term of this Agreement ․

(Dkt. 14-3 [2020 Agreement] at 15–16.)

Defendants argue that the Release in the 2020 Agreement bars Total Vision's lawsuit in its entirety. Total Vision responds that the Release is unconscionable, that it is invalid because it was part of VSP's anticompetitive scheme, and that even if the Release were not invalid in whole, it applies only to Total Vision, LLC, not Total Vision, P.C. (See Opp. at 15–21.)

First, the Court will not resolve on a motion to dismiss whether Total Vision, P.C., as well as Total Vision, LLC, is bound by the Release. This issue depends on whether Total Vision, P.C. qualifies as an “affiliated entit[y]” under the release—a factual issue best determined on a developed evidentiary record. See Brown v. Daikin Am. Inc., 756 F.3d 219, 226 (2d Cir. 2014) (vacating dismissal because “[w]hether two related entities are sufficiently integrated to be treated as a single employer is generally a question of fact not suitable to resolution on a motion to dismiss.”); Williams v. Mohawk Industries Inc., 314 F. Supp. 2d 1333, 1349 (N.D. Ga. 2004) (denying motion to dismiss because “[a]t this stage in the litigation, ․ the Court need only determine whether the Complaint sufficiently alleges the existence of an enterprise separate from Defendant.”) The term “affiliated entities” could very well encompass Total Vision, P.C. as well as Total Vision, LLC. However, the parties are also sophisticated entities with knowledge of Total Vision, P.C. and Total Vision, LLC and have not proffered any particular explanation of why both entities were not parties to the subject agreements. Though the Court is somewhat skeptical of Total Vision's argument that Total Vision, P.C. should not be considered an affiliate of Total Vision, LLC, the issue is more appropriately resolved on summary judgment, not on a motion to dismiss. See Wells Fargo Bank N.A. v. Fid. Nat'l Title Grp., Inc., 2022 WL 16527722, at *4 (D. Nev. Oct. 28, 2022) (“[F]act questions generally [are] not suitable for determination at the dismissal stage.”).

Second, even if the Release applies to both Total Vision, LLC and Total Vision, P.C., Total Vision has plausibly pled that the Release is invalid because it was “part and parcel” of VSP's antitrust conspiracy. “Rarely discussed and more rarely applied,” VKK Corp. v. Nat'l Football League, 244 F.3d 114, 125 (2d Cir. 2001), “the ‘part and parcel’ doctrine ․ holds that a release is invalid if it is an integral part of a scheme to violate the antitrust laws,” id. at 121. “If the release is merely an outgrowth, rather than a cause of the violation, it is not part and parcel of the antitrust conspiracy.” Id. (cleaned up). Moreover, a “contract is invalid in all its parts if it is found that it formed part of the plan used to obtain a monopoly; the whole contract, including any otherwise reasonable provisions therein, is unenforceable.” Carter v. Twentieth Century-Fox Film Corp., 127 F. Supp. 675, 680 (W.D. Mo. 1955).

Accepting the allegations in the Complaint as true, Total Vision has plausibly alleged that the 2020 Agreement as a whole violated antitrust law and is therefore unenforceable. Total Vision's Complaint describes several anticompetitive aspects of the 2020 Agreement designed to stifle competition and funnel business primarily to VSP's various entities. (See, e.g., Compl. ¶¶ 96–109.) VSP repeatedly conveyed that its “goal was to ‘cap’ Total Vision's growth.” (Id. ¶ 9; see also id. ¶¶ 85–87, 97.) Total Vision has also plausibly alleged that the Release was an integral part of VSP's plan to restrain Total Vision's growth and further dominate various optometry markets. “Indeed, VSP insisted on these provisions after Total Vision, LLC raised antitrust concerns about VSP's conduct, and while it knew that Total Vision, LLC had no other choice but to accept the anticompetitive 2020 Agreement. [Total Vision alleges that t]he release is [merely] a naked attempt by VSP to insulate itself from liability for the anticompetitive agreement it imposed on Total Vision, LLC [in the 2020 Agreement].” (Compl. ¶ 110.) Defendants cite only one case rejecting application of the part and parcel doctrine on a motion to dismiss (as opposed to on summary judgment after considering evidence); that case differs from the one at hand because the court there determined “that the alleged conspiracy ․ ‘was complete’ ” prior to the parties’ execution of the subject release of claims, and therefore the release “was not integral to the alleged conspiracy.” QS Holdco Inc. v. Bank of Am. Corp., 2019 WL 3716443, at *4 (S.D.N.Y. Aug. 6, 2019) (quoting VKK, 244 F.3d at 126). Here, the Release was part of the 2020 Agreement from which Total Vision's antitrust claims arise, so it would not be appropriate for the Court at this stage to decide that the Release is valid or invalid.

Finally, Total Vision asserts that the Release is unconscionable. “Both procedural and substantive unconscionability must be shown for the defense to be established ․” OTO, L.L.C. v. Kho, 8 Cal. 5th 111, 125–26, 251 Cal.Rptr.3d 714, 447 P.3d 680 (2019). “Procedural unconscionability addresses the manner in which agreement to the disputed term was sought or obtained, such as unequal bargaining power between the parties and hidden terms included in contracts of adhesion. Substantive unconscionability addresses the effect of the term itself, such as whether the provision is so harsh or oppressive that it should not be enforced. These elements, however, need not be present to the same degree. The more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” Szetela v. Discover Bank, 97 Cal. App. 4th 1094, 1095, 118 Cal.Rptr.2d 862 (2002).

“When [a] weaker party is presented [a] clause and told to ‘take it or leave it’ without the opportunity for meaningful negotiation, oppression, and therefore procedural unconscionability, are present.” Id. at 1100, 118 Cal.Rptr.2d 862. Total Vision's allegations as to this element are plausible. Total Vision alleges that VSP insures about 65% of nationwide and California consumers with vision insurance, (see Compl. ¶¶ 45–48), and that VSP insureds account for the majority of Total Vision's business, (see id. ¶¶ 45–46, 52). VSP is so dominant in the vision insurance market that its 2020 termination of Total Vision's in-network status was “hugely disruptive” and led to Total Vision losing many patients. (Id. ¶¶ 90–91.) This termination was the backdrop that led to Total Vision accepting terms that it otherwise found unacceptable. According to Total Vision, VSP presented its terms on a largely “take it or leave it” basis, and if Total Vision wanted to “avoid jeopardizing” its business, it had to accept VSP's terms. (Id. ¶ 96.) California courts acknowledge that “even large business entities may have relatively little bargaining power, depending on the identity of the other contracting party and the commercial circumstances surrounding the agreement.” A & M Produce Co. v. FMC Corp., 135 Cal. App. 3d 473, 489–90, 186 Cal.Rptr. 114 (Ct. App. 1982).

Total Vision also sufficiently alleges that the Release is substantively unconscionable. “The paramount consideration in assessing [substantive] unconscionability is mutuality.” Bakersfield Coll. v. California Cmty. Coll. Athletic Assn., 41 Cal. App. 5th 753, 765, 254 Cal.Rptr.3d 470 (2019). Total Vision argues that the Release is substantively unconscionable because it imposes de facto one-sided terms on Total Vision, LLC, including: (1) barring all claims except those that only VSP might bring; (2) making it exceedingly costly for Total Vision to challenge the 2020 Agreement by—in contravention of antitrust law forbidding fee shifting to plaintiffs, see Azizian v. Federated Dep't Stores, Inc., 499 F.3d 950, 959 (9th Cir. 2007) (“Clayton Act attorney's fees awards are ‘available only to plaintiffs who prove an antitrust injury.’ ”)—mandating that Total Vision, LLC pay all VSP's legal fees and costs if even a part of its action is dismissed; and (3) effectively foreclosing antitrust treble damages through the $250,000 damages cap. (See Opp. at 20–21; Compl. ¶¶ 104–109.)

Total Vision adequately pleads that the effect of these clauses in the 2020 Agreement is to unilaterally limit Total Vision's opportunity for recourse against VSP. California courts have found contractual provisions producing similar effects substantively unconscionable. See, e.g., Carlson v. Home Team Pest Def., Inc., 239 Cal. App. 4th 619, 635, 191 Cal.Rptr.3d 29 (2015) (“[T]he fact that Home was exempt from having to arbitrate its most likely claims against Carlson while Carlson was required to relinquish her access to the courts for all of her nonstatutory claims alone warrants a conclusion that the Agreement was unenforceable under the sliding-scale test set forth by our Supreme Court.”); Fitz v. NCR Corp., 118 Cal. App. 4th 702, 713, 13 Cal.Rptr.3d 88 (2004) (“[A]n agreement may lack ‘a modicum of bilaterality’ and therefore be unconscionable if the agreement requires ‘arbitration only for the claims of the weaker party but a choice of forums for the claims of the stronger party.’ ”); Pokorny v. Quixtar, Inc., 601 F.3d 987, 1004 (9th Cir. 2010) (“[B]ecause the fee-shifting clause puts [independent business owners] who demand arbitration at risk of incurring greater costs than they would bear if they were to litigate their claims in federal court, the district court properly held that the clause is substantively unconscionable.”); Little v. Auto Stiegler, Inc., 29 Cal.4th 1064, 130 Cal.Rptr.2d 892, 63 P.3d 979, 984–85 (Cal. 2003) (holding damages cap unconscionable where it “inordinately benefit[ed] defendants”). This Release is similarly “unfairly one-sided” in each of these ways. Fitz, 118 Cal. App. 4th at 713, 13 Cal.Rptr.3d 88.

In sum, the terms of the Release do not justify dismissal of Total Vision's claims. Ruling on the Release's validity on any of the grounds raised would require resolution of issues of fact not appropriate at this stage.

B. Tying

Total Vision's fourth through sixth causes of action allege illegal tying under Sections 1, 2, and 15 of the Sherman Act. “A tying arrangement is a device used by a seller with market power in one product market to extend its market power to a distinct product market.” Rick-Mik Enterprises, Inc. v. Equilon Enterprises LLC, 532 F.3d 963, 971 (9th Cir. 2008). “To accomplish this objective, the seller conditions the sale of one product (the tying product) on the buyer's purchase of a second product (the tied product). Tying arrangements are forbidden on the theory that, if the seller has market power over the tying product, the seller can leverage this market power through tying arrangements to exclude other sellers of the tied product.” Id. (cleaned up).

Total Vision alleges that “VSP tied Total Vision, P.C.’s access to VSP's monopoly insurance network to Total Vision, LLC's and, ultimately, Total Vision, P.C.’s purchase of glasses frames, contact lenses, and optometry practice management software from VSP and its subsidiaries.” (Compl. ¶¶ 224, 229, 235.) Defendants argue that Total Vision does not allege the sale of a tying product. (Mot. at 8.) As Defendants see it, VSP as an insurance provider purchases optometry services from entities like Total Vision; it does not sell in-network status as a market product. (See id.)

On similar facts, the Central District of Illinois held that “[i]n-network status is not a product that is produced and distributed in a competitive market. Rather, in-network status is a status obtained by a provider by contracting with [an insurer].” Acuity Optical Lab'ys, LLC v. Davis Vision, Inc., 2016 WL 4467883, at *18 (C.D. Ill. Aug. 23, 2016). And a “contractual obligation is not a product or service for purposes of tying arrangement analysis.” Bender v. Southland Corp., 749 F.2d 1205, 1215 (6th Cir. 1984); see also Rick-Mik Enterprises, Inc. v. Equilon Enterprises LLC, 532 F.3d 963, 975 (9th Cir. 2008) (“A complaint about such contractual obligations is not an antitrust matter.”).

The Third Circuit similarly rejected that an insurance provider's grant of in-network status to a pharmacy could fit within the bounds of tying's “purchase/sale paradigm.” Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494, 511 (3d Cir. 1998). And the Ninth Circuit has declined to interpret antitrust laws more expansively in other contexts. See 49er Chevrolet, Inc. v. Gen. Motors Corp., 803 F.2d 1463, 1469 (9th Cir. 1986) (“The dealers contend that GM's mandatory requirement that they do warranty work in order to keep their franchises is an illegal tying arrangement ․ In this case, where the dealers perform repair services for GM and are paid by GM, they are not buyers of an allegedly tied product at all, but are sellers. Accordingly, the court was correct that the existing case law on tying does not apply. The dealers, recognizing this difficulty, have argued for an extension of tying law to the circumstances of this case. We decline to do so.”).

As to these claims, the Court agrees with Defendants that Total Vision's allegations mirror claims rejected by many courts. Just as car dealers agree to certain obligations, such as performing warranty repair services, as part of their franchise agreement with manufacturers, Total Vision here agreed to sell certain products as part of maintaining its in-network status. Total Vision did not purchase insurance coverage from VSP or pay otherwise for in-network status. In-network status arises from a mere contractual obligation, which cannot form the basis for a tying claim. See Bender, 749 F.2d at 1215. Accordingly, Total Vision's fourth through sixth claims for tying must be dismissed.

C. Refusal to Deal

In its seventh cause of action, Total Vision alleges that VSP refused to deal in violation of the Sherman Act, 15 U.S.C. §§ 2, 15. The “exception to this general rule that there is no antitrust duty to deal comes under the Supreme Court's decision in Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 105 S.Ct. 2847, 86 L.Ed.2d 467 (1985). There, the Court held that a company engages in prohibited, anticompetitive conduct when (1) it unilateral[ly] terminat[es] ․ a voluntary and profitable course of dealing; (2) the only conceivable rationale or purpose is to sacrifice short-term benefits in order to obtain higher profits in the long run from the exclusion of competition; and (3) the refusal to deal involves products that the defendant already sells in the existing market to other similarly situated customers.” Fed. Trade Comm'n v. Qualcomm Inc., 969 F.3d 974, 993–94 (9th Cir. 2020) (cleaned up). Defendants move to dismiss this claim because Total Vision does not plead a sufficiently longstanding, voluntary course of dealing. (See Dkt. 30 [Reply] at 11.)

Although Total Vision may not ultimately prevail on this claim, the Court will not dismiss it at this early stage. Defendants have cited no law setting a definitive length of time required to establish a course of dealing under the Sherman Act. And whether Total Vision's providers’ “decades-long” relationships with VSP, (Compl. ¶ 56), should be attributed to Total Vision is an issue of fact not appropriate for resolution now.

D. Monopolization and Attempted Monopolization

In Counts II and III, Total Vision alleges that VSP has willfully maintained, or has attempted to maintain, a monopoly “in the market for vision insurance for independent optometry practices in California” and has reduced competition as a result. (Compl. at 60–61.) A claim for “monopolization” has two elements: “(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.” Alaska Airlines, Inc. v. United Airlines, Inc., 948 F.2d 536, 541 (9th Cir. 1991). “A claim for “attempted monopolization” has three elements: 1) a specific intent to monopolize a relevant market; 2) predatory or anticompetitive conduct; and 3) a dangerous probability of success.” Id. at 542; Cal. Comput. Prods., Inc. v. Int'l Bus. Machs. Corp., 613 F.2d 727, 735 (9th Cir. 1979). Both claims have a common focus: they “emphasize monopoly power and the acquisition or perpetuation of this power by illegitimate ‘predatory’ practices” in the relevant market. Alaska Airlines, 948 F.2d at 542. Defendants argue that Total Vision's claims “fail because it has not pled facts sufficient to establish that VSP (1) possesses monopoly power, (2) has engaged in any predatory practice, (3) which conduct is reasonably capable of enabling VSP to gain or maintain market power in the claimed California vision insurance market.” (Mot. at 11.) The Court addresses each point in turn.

First, the Court rejects Defendants’ characterization of Total Vision's allegations regarding VSP's monopoly power as wholly conclusory. Total Vision supports its allegations of VSP's monopoly power with specific facts, alleging, for example that “[i]n California ․ VSP contracted with ‘approximately 4,000 panel doctors, constituting about 90% of California optometrists in independent private practice’ and covered ‘over 5.7 million members accounting for total annual revenue of approximately $200 million.’ ” (Compl. ¶ 44.) Total Vision also alleges that in California, “patients insured by VSP comprised 62% of total 2022 ․” (Id. ¶ 45.) And “[t]he existence of [monopoly] power ordinarily may be inferred from the predominant share of the market.” United States v. Grinnell Corp., 384 U.S. 563, 571, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966).

Second, the Complaint sufficiently alleges VSP's predatory practices. Actions are predatory when they “exclude rivals on some basis other than efficiency.” Aspen Skiing, 472 U.S. at 605, 105 S.Ct. 2847. “[I]n examining whether [a plaintiff's] burden has been discharged, the courts must consider the [the allegations] as a whole, giving plaintiffs ‘the full benefit of their proof without tightly compartmentalizing the various factual components and wiping the slate clean after scrutiny of each.’ ” William Inglis & Sons Baking Co. v. ITT Cont'l Baking Co., 668 F.2d 1014, 1038 (9th Cir. 1981). According to Total Vision, VSP employed a variety of tactics through restrictive contractual terms, during contract negotiations, in an attempted acquisition of Total Vision, and through treating Total Vision differently from competitors that VSP owned—all actions that attempted to funnel business to VSP and limit Total Vision's presence in the independent optometry practice market. (See Compl. ¶¶ 79–144; see Opp. at 9–10.)

Finally, Defendants argue that “VSP's challenged conduct is untethered from the alleged relevant market,” the California independent optometry market. (See Mot. at 15–16.) In other words, Total Vision alleges VSP has monopoly power in the vision insurance market, but not the California independent optometry market—the market in which Total Vision operates and was allegedly harmed. (See id. at 15.) Total Vision responds that “because individual optometrists lack the market presence to push back against VSP, VSP entrenches its vision insurance monopoly by halting the growth of any larger practice group (like [Total Vision]) that can negotiate for better terms. VSP continually prunes the independent optometry market such that no practice group can ever grow strong enough to challenge its control[, which] allows VSP to monopolize the vision insurance market.” (Opp. at 10; see Compl. ¶¶ 142, 189–91, 198.)

The one case Defendants cite supporting their position is inapposite. In Interface Group, Inc. v. Massachusetts Port Authority, 816 F.2d 9 (1st Cir. 1987), the First Circuit held that the Massachusetts Port Authority's refusal to allow a non-competing entity, a charter airline operator, to use a facility, a particular terminal at Logan airport, did not violate the Sherman Act. See id. at 12. But Total Vision's case does not at all resemble that one. In Interface Group, the plaintiff failed to allege any “plausible connection between exclusive dealing and antitrust harm ․” Id. at 11. Here, although Total Vision does not allege it competes in the vision insurance market, Total Vision extensively describes how VSP's monopoly power in a closely related market impacts its ability to do competitive business. (See Compl. ¶¶ 142, 189–91, 198.) And Total Vision alleges that VSP uses its monopoly power in the vision insurance market to strengthen its position in markets in which Total Vision directly competes. (See, e.g., id. ¶¶ 4, 38, 77–81.) Absent any authority indicating that these allegations are insufficient, the Court declines to dismiss these claims.

E. Unfair Competition

Total Vision also asserts claims against Defendants for unlawful and unfair conduct under California's Unfair Competition Law (UCL). The UCL is “sweeping, embracing anything that can properly be called a business practice and that at the same time is forbidden by law.” Cel-Tech Commc'ns, Inc. v. Los Angeles Cellular Tel. Co., 20 Cal. 4th 163, 180, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999) (quotation marks omitted). “[T]he word ‘unfair’ ․ means conduct that threatens an incipient violation of an antitrust law, or that violates the policy or spirit of one of those laws because its effects are comparable to a violation of the law, or that otherwise significantly threatens or harms competition.” Id. at 166, 83 Cal.Rptr.2d 548, 973 P.2d 527. Defendants argue that Total Vision's claim under the unlawful prong of the UCL should be dismissed because it has not plausibly alleged any antitrust violations that would give rise to a UCL claim. Defendants also argue that Total Vision's claim under the unfair prong should be dismissed because conduct that is permitted under antitrust law cannot be unfair under the UCL, and any unfairness must be “tethered to some legislatively declared policy or proof of some actual or threatened impact on competition,” id. (See Mot. at 17.)

Since the Court finds Total Vision has plausibly pled several antitrust claims, Total Vision's “unlawful” claim under the UCL also survives. As to Defendants’ argument that Total Vision's allegations must be “tethered” to a specific legislative policy, the conduct alleged plainly threatens competition in the marketplace. Courts find UCL “unfair” claims plausible so long as they allege that the defendant's conduct threatens fair competition. See Bold Ltd. v. Rocket Resume, Inc., 2023 WL 4157626, at *6 (N.D. Cal. June 22, 2023) (denying motion to dismiss UCL claim despite argument that plaintiff “failed to allege that Defendants’ actions are tethered to any legislative policy”); In re Carrier IQ, Inc. Consumer Privacy Litig., 78 F. Supp. 3d 1051, 1116 (N.D. Cal. 2015) (“Plaintiffs need merely to show that the effects of [defendants’] conduct ‘are comparable to or the same as a violation of the law, or otherwise significantly threaten[ ] or harm[ ] competition.’ ” (emphasis omitted)). As discussed repeatedly in the context of Total Vision's other antitrust claims, Total Vision has plausibly pled that Defendants acted anticompetitively.

Defendants emphasize in reply that the UCL cannot render unlawful conduct that is “explicitly reasonable, condoned or permitted under antitrust law ․” (Reply at 15.) But given Total Vision's surviving antitrust claims, that argument doesn't hold water.

F. Tortious Interference with Prospective Business Relations

Total Vision's final cause of action is for tortious interference with prospective business relations with the forty-one optometry practices it was negotiating to acquire in August 2020 when VSP suddenly terminated Total Vision's in-network status. (See Compl. ¶¶ 89, 92–95, 246–53.) The elements of a tortious-interference claims are: “(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.” CRST Van Expedited, Inc. v. Werner Enterprises, Inc., 479 F.3d 1099, 1108 (9th Cir. 2007). Defendants argue this claim is both insufficiently pled and is barred under the relevant statute of limitations. (See Mot. at 18.) The Court agrees on the limitations front.

Though Total Vision's pleading would otherwise be adequate at this stage, a tortious-interference claim is subject to a two-year statute of limitations. Cheske v. Waring, 2010 WL 4916611, at *2 (C.D. Cal. Nov. 24, 2010) (citing Cal. Code Civ. Proc. § 339(1); Knoell v. Petrovich, 76 Cal. App. 4th 164, 168, 90 Cal.Rptr.2d 162 (Ct. App. 1999)). Total Vision filed its Complaint on September 26, 2023. Total Vision's claim for intentional interference explicitly focuses only on the disruption of its prospective relationships with forty-one optometry practices when VSP terminated its in-network status prior to signing the 2020 Agreement. (See ¶¶ 92–96.) All relevant conduct as pled occurred prior to October 2020 and therefore falls outside the limitations period. It may be possible that Total Vision could plead a claim for tortious interference implicating the continuing violations doctrine for ongoing interference with such relationships, see Cheske, 2010 WL 4916611, at *2, but Total Vision has not done so in this pleading.

G. Other Defendants

In addition to VSP itself, Total Vision names eight VSP affiliates as Defendants. (See Compl. at 1.) Defendants argue that the allegations against VSP's affiliates are insufficient under Federal Rule of Civil Procedure 8(a) because Total Vision does not attribute any particular wrongful acts to them. See Newman v. OneWest Bank, FSB, 2010 WL 797188, at *5 (C.D. Cal. Mar. 5, 2010) (“Plaintiffs’ allegations fail to meet the basic pleading requirements of Rule 8(a) because they lump all of the defendants together.”). Total Vision alleges that these other entities are all subsidiaries of VSP, (see Compl. ¶¶ 19–26), but simply alleging this business relationship is not sufficient to put these entities on notice of the claims against them. A plaintiff “obviously may not pursue an antitrust claim against a defendant who is not alleged to have done anything at all. Antitrust law doesn't recognize guilt by mere association, imputing corporate liability to any affiliate company unlucky enough to be a bystander to its sister company's alleged misdeeds.” SD3, LLC v. Black & Decker (U.S.) Inc., 801 F.3d 412, 423 (4th Cir. 2015), as amended on reh'g in part (Oct. 29, 2015).

However, though mere association is not enough, a sister district court in the Ninth Circuit treated related corporate defendants in the antitrust context as one collective actor, holding that “in a single-enterprise situation, it is the affiliated corporations’ collective conduct—i.e., the conduct of the enterprise they jointly compose—that matters; it is the enterprise which must be shown to satisfy the elements of a monopolization or attempted monopolization claim.” Unigestion Holding, S.A. v. UPM Tech., Inc., 305 F. Supp. 3d 1134, 1146 (D. Or. 2018) (emphasis in original). The district court based its analysis on the Ninth Circuit's consideration of sister and parent companies as “part of an integrated entity” whose behavior was jointly subject to a Section 2 inquiry. (Id.) (quoting Vollrath Co. v. Sammi Corp., 9 F.3d 1455, 1461 (9th Cir. 1993)).

Applying that framework here, the Court finds that Total Vision has adequately pled many of the Defendants’ involvement in VSP's anticompetitive scheme. Total Vision alleges that VSP Ventures as its direct competitor acquires independent optometry practices and that VSP facilitates these acquisitions through “enormous pressure” placed on optometrists to remain in VSP's network. (Compl. ¶ 74.) And part of VSP's alleged anticompetitive scheme involved forcibly funneling sales to its subsidiaries in its agreements with Total Vision. Total Vision obligations included: a minimum dollar-amount in frames purchased from Defendants Marchon Eyewear, Inc. and Altair Eyewear, Inc., (see id. ¶ 60); a requirement to use VSP's practice management software, provided by Defendant Eyefinity, Inc. (see id. ¶ 66); and a requirement to use subsidiary VSP Labs, Inc.’s network of laboratories, (see id. ¶ 65). These allegations are sufficient in the antitrust context to put these Defendants on notice of their involvement in the subject dispute.

However, the Court cannot glean how Defendants Visionworks of America, Inc., Plexus Optix, Inc., and Eyeconic, Inc. fit within the alleged anticompetitive scheme besides their status as subsidiaries of VSP, which is not independently sufficient to meet the pleading requirements of Rule 8. Accordingly, these three Defendants must be dismissed.

H. Leave to Amend

Despite Total Vision's lack of request for leave to amend, the Court will grant such leave. “The court should freely give leave [to amend] when justice so requires,” Fed. R. Civ. P. 15(a)(2), and the Ninth Circuit requires that this policy favoring amendment be applied with “extreme liberality.” Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 712 (9th Cir. 2001); see also Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (holding that dismissal with leave to amend should be granted even if no request to amend was made). Because Total Vision may be able to remedy some of the deficiencies identified in this Order and in Defendants’ briefing, amendment at this stage would not necessarily be futile and must be granted.

V. CONCLUSION

For the foregoing reasons, Defendants’ motion to dismiss is GRANTED as to Total Vision's claims for tying and tortious interference, and as to all of its claims against Defendants Visionworks, Plexus, and Eyeconic. Defendants’ motion is DENIED on all other grounds. If Total Vision wishes to file an amended complaint, it must do so by March 5, 2024. Should Total Vision not amend, Defendants shall file an answer to Total Vision's Complaint by March 19, 2024.

FOOTNOTES

1.   Having read and considered the papers presented by the parties, the Court finds this matter appropriate for disposition without a hearing. See Fed. R. Civ. P. 78; Local Rule 7-15. Accordingly, the hearing set for February 26, 2024 at 1:30 p.m. is hereby vacated and off calendar.

2.   Total Vision, P.C. is not explicitly named as a party to either of the agreements at issue in this action. (See Compl. ¶ 5.)

CORMAC J. CARNEY, UNITED STATES DISTRICT JUDGE