Gibson et al v. MGM Resorts International et al Doc.

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Case 2:23-cv-00140-MMD-DJA Document 140 Filed 10/24/23 Page 1 of 6

3 UNITED STATES DISTRICT COURT

4 DISTRICT OF NEVADA

5 ***

6 RICHARD GIBSON, et al., Case No. 2:23-cv-00140-MMD-DJA

7 Plaintiffs, ORDER
v.
8
MGM RESORTS INTERNATIONAL, et
9 al.,

10 Defendants.

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I. SUMMARY
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Plaintiffs Richard Gibson and Heriberto Valiente, on behalf of themselves and all
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others similarly situated, allege that defendant hotel operators on the Las Vegas Strip
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including Defendant MGM Resorts International unlawfully restrained trade in violation of
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Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, et seq. (“Sherman Act”) by
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artificially inflating the price of hotel rooms after agreeing to all use pricing software
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marketed by the same company. (ECF No. 1 (“Complaint”).) Before the Court is MGM’s
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motion to dismiss.1 (ECF No. 92 (“Motion”).) As further explained below, because the
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Complaint does not contain allegations that any MGM hotels within Plaintiffs’ defined
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market area of the Las Vegas Strip use the Rainmaker software, the Court will grant the
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Motion.
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II. BACKGROUND
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The following allegations are adapted from the Complaint. Plaintiffs “challenge an
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unlawful agreement among Defendants to artificially inflate the prices of hotel rooms on
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the Las Vegas Strip above competitive levels.” (ECF No. 1 at 3.) The gist of the alleged
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conspiracy is that all of the defendant hotel operators agreed to use a shared set of pricing
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1Plaintiffs
responded (ECF No. 110), and MGM replied (ECF No. 124). This order
does not address the other defendants’ motion to dismiss. (ECF No. 91.)

Dockets.Justia.com
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1 algorithms offered by the Rainmaker subsidiary of Defendant Cendyn that recommend

2 supracompetitive prices to the hotel operators. (Id. at 3.) Plaintiffs define the Las Vegas

3 Strip as “the four-mile stretch in the unincorporated towns immediately south of the City

4 of Las Vegas.” (Id. at 3 n.1.) Plaintiffs otherwise explain why the Las Vegas Strip allegedly

5 constitutes a relevant antitrust market, primarily because it is unique. (Id. at 13-14.)

6 Plaintiffs define MGM as one of the defendant hotel operators. (Id. at 3 n.2.) MGM

7 allegedly:

8 rents hotel rooms in Las Vegas, Nevada at multiple hotel properties. MGM
operates the Bellagio, VDARA at Aria, Aria, Park MGM, New York-New
9 York, MGM Grand, Excalibur, Luxor, Mandalay Bay, and the Four Seasons
Hotel. MGM is one of Cendyn’s clients and uses its revenue management
10 software.

11 (Id. at 12.) Plaintiffs otherwise allege that MGM ‘controls’ the Cosmopolitan Hotel on the

12 Las Vegas Strip as well. (Id. at 14.) As to the Cosmopolitan, a confidential witness who is

13 allegedly a former employee of Cendyn is quoted in the Complaint as saying, “Caesars

14 probably knew we were in the Cosmopolitan and vice versa.” (Id. at 10.)

15 Plaintiffs also discuss how an MGM-operated hotel called the Borgata Hotel in

16 Atlantic City, New Jersey uses Rainmaker’s GuestRev pricing algorithm to validate the

17 pricing recommendations the pertinent employee makes to her management. (Id. at 17.)

18 These allegations are drawn from marketing materials on Cendyn’s website. (Id. at 17 n.

19 19, 20.) Plaintiffs also mention that MGM is one of the two largest players on the Las

20 Vegas Strip in terms of hotel ownership in describing how the Las Vegas Strip hotel

21 market is highly concentrated. (Id. at 23.)

22 The remainder of Plaintiffs’ allegations in their Complaint discuss either Hotel

23 Operators or Defendants generally, but not MGM specifically. (See generally id.) MGM

24 appears to represent in its Motion that none of its hotels on the Las Vegas Strip use any

25 Rainmaker software when it writes, “Plaintiffs do not, however, and cannot, allege that

26 any of the ten Las Vegas properties they allege MGM operates uses Rainmaker software

27 that provides them with any pricing recommendations or data.” (ECF No. 92 at 4

28 (emphasis added).)

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1 III. DISCUSSION

2 MGM argues in pertinent part that Plaintiffs’ claims against it should be dismissed

3 because they fail to allege in their Complaint that MGM uses any Rainmaker software at

4 any of the ten hotels on the Las Vegas Strip MGM allegedly operates, much less that

5 these hotels accept all of the recommendations any software provides to them. (Id. at 3.)

6 Plaintiffs counter that three sets of allegations, taken together, plausibly allege MGM is

7 part of the alleged conspiracy on the Las Vegas Strip. (ECF No. 110 at 8-10.) The Court

8 agrees with MGM.

9 The United States Court of Appeals for the Ninth Circuit “require[s] some

10 showing—direct or circumstantial—that the [Sherman Act] defendants ‘actively

11 participated in an individual capacity in the scheme.”’ SmileDirectClub, LLC v. Tippins, 31

12 F.4th 1110, 1119 (9th Cir. 2022) (citations omitted); see also id. at 1119-20 (affirming

13 dismissal of certain defendants in Sherman Act case because the complaint pleaded

14 nothing to implicate them in the alleged conspiracy); see also In re California Bail Bond

15 Antitrust Litig., 511 F. Supp. 3d 1031, 1047 (N.D. Cal. 2021) (“To survive a motion to

16 dismiss, a complaint alleging an antitrust conspiracy “must allege that each individual

17 defendant joined the conspiracy and played some role in it because, at the heart of an

18 antitrust conspiracy is an agreement and a conscious decision by each defendant to join

19 it.”) (citation omitted). Indeed, even Plaintiffs argue that they must “make allegations that

20 plausibly suggest that each [d]efendant participated in the alleged conspiracy.” (ECF No.

21 110 at 7 (citing In re Static Random Access Memory (SRAM) Antitrust Litig., 580 F. Supp.

22 2d 896, 903-04 (N.D. Cal. 2008)).)

23 Plaintiffs’ Complaint does not plausibly allege that MGM joined Plaintiffs’ alleged

24 conspiracy to fix prices on the Las Vegas Strip. The Court addresses each allegation or

25 set of allegations that Plaintiffs point to in their opposition in turn.

26 Plaintiffs first point to their allegations (pulled from Cendyn’s own marketing

27 materials) that an MGM-operated hotel in Atlantic City, New Jersey, the Borgata Hotel,

28 uses Rainmaker. (ECF No. 110 at 8-9.) This does not show that MGM-operated hotels

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1 on the Las Vegas Strip—those alleged to be part of the conspiracy—use the Rainmaker

2 software. Atlantic City is not within the relevant market as Plaintiffs have alleged it. (ECF

3 No. 1 at 13-14 (defining the Las Vegas Strip as the relevant antitrust market area and

4 explaining why that specific geography matters so much).) And MGM is a large company

5 that operates many hotels, so it is not plausible to suggest (especially considering the

6 dearth of other pertinent factual allegations in the Complaint) that, because one hotel

7 uses a piece of software, all MGM-operated hotels use it.

8 Moreover, the Complaint contains the cryptic sentence, “MGM is one of Cendyn’s

9 clients and uses its revenue management software.” (Id. at 12.) Cendyn presumably has

10 many products, so saying that MGM is a client does not mean it uses the specific

11 Rainmaker software central to Plaintiffs’ alleged conspiracy. The same goes for the

12 related allegation that MGM, “uses its revenue management software.” That does not

13 necessarily mean Rainmaker, much less the same Rainmaker software as the other hotel

14 defendants, much less that MGM accepts all of the recommendations it is presented with

15 by the unspecified software. And there is indeed no dispute that MGM uses revenue

16 management software, specifically Rainmaker, at a hotel it operates in Atlantic City. So

17 the statement that MGM uses Cendyn’s revenue management software could very well

18 mean that it does so only at the Borgata Hotel in Atlantic City. And this statement is

19 otherwise not inconsistent with what MGM argues in its Motion—that it does not use the

20 Rainmaker software at any of the 10 or 11 (depending on whether one counts the

21 Cosmopolitan) hotels mentioned in the Complaint that MGM operates on the Las Vegas

22 Strip, though it does at the Borgata Hotel.

23 Plaintiffs next point to a 2015 press release from Rainmaker stating that MGM is

24 among its clients, and two statements from confidential witnesses who used to work for

25 Cendyn that Rainmaker is used by ‘just about every hotel on the Las Vegs Strip’ and a

26 more specific estimate that Rainmaker is used by ‘90% of the Hotels on the Las Vegas

27 Strip.’ (ECF No. 110 at 9-10.) But none of these statements establish that the 10 hotels

28 MGM operates on the Las Vegas Strip (excluding the Cosmopolitan, which the Court

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1 addresses below) use the Rainmaker software. MGM could be within the apparent

2 minority of hotels that do not use the Rainmaker software. Plaintiffs simply do not allege

3 that the 10 MGM-operated hotels on the Las Vegas strip use the Rainmaker software in

4 a way otherwise contemplated by Plaintiffs’ purported conspiracy. And as to the press

5 release, that too could just as easily refer to the Borgata Hotel as to any of the many other

6 hotels MGM operates. These allegations lack the requisite link to MGM-operated hotels

7 on the Las Vega Strip.

8 Plaintiffs finally point to the Cosmopolitan being touted as a ‘success story’ on

9 Cendyn’s own website, but concede the video Plaintiffs point to was made in 2019, before

10 MGM began operating the hotel in 2021. (ECF No. 110 at 10.) The Court also agrees with

11 MGM that it is notable Plaintiffs do not include the Cosmopolitan in their list of hotels

12 operated by MGM. (ECF No. 124 at 7.) The plausible inference to draw from that notable

13 omission is that the time periods do not overlap—that the Cosmopolitan used Rainmaker

14 before MGM took over its operations. And there are otherwise no allegations in the

15 Complaint that specifically discuss MGM, as opposed to the hotel operator defendants or

16 Defendants generally. Said otherwise, the Complaint does not contain allegations

17 sufficient to plausibly suggest that any MGM hotels within Plaintiffs’ defined market area

18 of the Las Vegas Strip use the Rainmaker software.

19 In sum, the Court will grant the Motion because Plaintiffs do not plausibly allege

20 that any MGM hotels within Plaintiffs’ defined market of the Las Vegas Strip used the

21 Rainmaker software in a way otherwise alleged as the alleged conspiracy Plaintiffs

22 challenge in this case. MGM is accordingly dismissed from this case without prejudice,

23 as the Court cannot say that amendment would be futile. The allegations that an MGM-

24 operated hotel in New Jersey uses Rainmaker, and the allegations about how the

25 Cosmopolitan at least used to use Rainmaker suggest that it is possible that Plaintiffs

26 could add further factual allegations to their Complaint to show that MGM participated in

27 the alleged conspiracy on the Las Vegas Strip. Any amended complaint must be filed

28 within 30 days of the date of entry of this order.

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1 IV. CONCLUSION

2 The Court notes that the parties made several arguments and cited several cases

3 not discussed above. The Court has reviewed these arguments and cases and

4 determines that they do not warrant discussion as they do not affect the outcome of the

5 Motion before the Court.

6 It is therefore ordered that MGM’s motion to dismiss (ECF No. 92) is granted.

7 Dismissal is without prejudice and with leave to amend. Specifically, the Court grants

8 Plaintiffs leave to file an amended complaint that includes MGM as a defendant if Plaintiffs

9 wish to again attempt to allege that MGM participated in the purported conspiracy. Any

10 amended complaint must be filed within 30 days of the date of entry of this order. If

11 Plaintiffs do not comply with this amendment deadline, the Court may dismiss MGM from

12 this case, with prejudice, without further advance notice to Plaintiffs.

13 DATED THIS 24th Day of October 2023.

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15
MIRANDA M. DU
16 CHIEF UNITED STATES DISTRICT JUDGE

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