In Secret Rebate Case, If It Walks Like A Duck, Allegations That It Will Also Quack Are Plausible

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On May 24, 2011, United States District Court, Central District of California, denied a motion to dismiss allegations of a "price squeeze" implemented through the granting of secret rebates to the plaintiff's customers, finding that the complaint stated a plausible claim under California Business and Professions Code section 17045. Drawing on "judicial experience and common sense", District Judge Dean D. Pregerson held that the allegations of the first amended complaint are sufficiently "plausible" on their face to withstand challenges under Bell Atl. Corp. v. Twombly, 550 U.S. 544, (2007). Western Pacific Kraft, Inc. v. Duro Bag Manufacturing Company, Case No. CV 10-06017 DDP (SSx), 5/24/11.

Plaintiff Western Pacific Kraft, Inc. ("WPK") is a wholesaler of paper bag products to smaller wholesale distributors. Defendant Duro Bag Manufacturing Company ("Duro") is the largest manufacturer of paper bags in the country, and the largest seller of paper bags in California. Duro was WPK's supplier, and also its principal competitor. For twenty years or more, Duro would reduce its prices to WPK, where WPK informed Duro that it had to meet competition from competing sources.

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