Connect with us

Hi, what are you looking for?


Judge allows Convoy’s monopoly complaints against DAT to proceed

The legal showdown between Convoy and DAT over competing load boards has been years in the making, and the latest developments have put DAT’s noncompete and exclusivity clauses in peril.

Convoy, a DAT load board customer since 2016, started buying rate information from DAT in 2018 under a data service agreement. Then, in November 2021, Convoy went public with its own load board, Convoy for Brokers, and details in press releases confirmed that the load board had been operating for a year by that point. 

DAT sued Convoy in January 2022, alleging that Convoy had broken its contract — specifically, noncompete clauses around the creation of load boards and exclusivity clauses around the publishing of load and rate data — and, moreover, had appropriated DAT’s trade secrets in order to do so. Six months later, Convoy countersued, alleging that DAT’s contracts illegally restrained trade and constituted a monopoly under federal and Oregon law. 

Both parties filed motions to dismiss the other’s respective claims. 

Last week, U.S. District Judge Karin Immergut handed down the first major ruling in the case, granting Convoy’s motions to dismiss five of DAT’s six claims and denying all of DAT’s motions to dismiss Convoy’s claims. Immergut gave DAT leave to amend its trade secrets claims, leaving open the possibility that they could proceed in a revised form, but seemed skeptical that such trade secrets even existed. The court accepted Convoy’s argument that because so many parties could access DAT’s data without any confidentiality agreement, Convoy’s provisioning of DAT data couldn’t be construed as a misappropriation of trade secrets.

Convoy pointed out that DAT’s own filings emphasized the ease with which customers could access its data, even from their phones, and quoted DAT’s complaint: “The DAT load board can be easily accessed through an app on customers’ mobile devices, or through more traditional means … [and] proprietary pricing and shipping data and information, is available to customers through the DAT network.”

Immergut agreed that DAT hadn’t shown that sufficient security measures had been taken to create a “trade secret”: “Because DAT did not allege the application of confidentiality provisions to such customers, Convoy contends that DAT has failed to sufficiently allege this element. ECF 26 at 9. This Court agrees.”

The Court went on to cite Ruckelshaus v. Monsanto to explain its reasoning: “[I]f an individual discloses his trade secret to others who are under no obligation to protect the confidentiality of the information, or otherwise publicly discloses the secret, his property right is extinguished.”

Most significantly, the court allowed Convoy’s contention that DAT’s contracts illegally attempted to restrain trade to proceed. Convoy said that DAT didn’t argue that Convoy was using DAT load and rate information to power its load board, and therefore that DAT was attempting to prohibit Convoy from creating a load board even with its own data

Immergut noted that “as Convoy points out, the non-compete provision seems to prevent Convoy from creating a load board under any circumstances. Convoy alleges that the non-compete provision bars Convoy from providing, or preparing to provide, any competitive product or service, even if Convoy did so without using DAT’s information. This Court finds that Convoy has plausibly alleged that the non-compete provision does not serve a legitimate business purpose.”

In addition to DAT’s noncompete clauses, the other part of Convoy’s monopoly allegations centered on DAT’s exclusive use clauses. In summary, if a DAT load board customer does not agree to sign an exclusivity clause prohibiting them from posting their loads to any other load board, the customer has to pay DAT higher rates. Convoy also complained that a DAT exclusivity clause unfairly barred it from contributing its own data to any other competing trucking rate assessor.

“As with the non-compete provision, Convoy has met the initial burden of demonstrating that the exclusive use arrangement has a substantial anticompetitive effect that harms consumers in the relevant market,” the court found.

Under the Sherman Anti-Trust Act, now that Convoy has made plausible allegations that DAT is illegally restraining trade and creating a monopoly, “the burden shifts to DAT to show a procompetitive rationale for the exclusive use arrangement,” Immergut wrote. DAT said that Convoy wasn’t forced to sign an exclusivity clause in order to do business with DAT; that it only did so in order to receive a discount.

DAT also argued that Convoy failed to show that DAT’s contracts had anticompetitive effects on the broader market in addition to injuring Convoy, but the court noted that it was DAT that retained possession of its agreements with other customers, and that Convoy had indeed provided indirect evidence of the existence of exclusivity clauses with other digital brokers. Further, the court said, the 9th U.S. Circuit Court of Appeals has already established that plaintiffs plead antitrust injury by demonstrating that they themselves — not the broader competition — were harmed.

Although Immergut noted that Convoy’s argument that DAT’s 64% market share was monopolistic was insufficient — what matters more are other factors, like barriers to entry and quality of competition — she did find in Convoy’s favor.

“Convoy has alleged that DAT creates entry barriers and limits the capacity of existing competitors to expand output in the relevant market by using non-compete agreements and exclusive use arrangements,” Immergut wrote, “by controlling significant volume of historical pricing data, and via network effects.” The court found that those claims constituted a plausible allegation that DAT possesses monopoly power in the spot trucking market.

DAT has a chance to amend some of its complaints, but the next major step in the legal battle will be the discovery phase, where the parties request documents and other disclosures in order to generate the proof for their allegations.