120
PLEADING AN ANTITRUST CONSPIRACY IN A POST-
TWOMBLY WORLD
By Joshua Stokes and Jordan Ludwig
1
I. INTRODUCTION
Bell Atlantic Corp. v. Twombly is one of the most important cases to ever be decided
interpreting the Federal Rules of Civil Procedure.
2
At its core, Twombly clarified what
Federal Rule of Civil Procedure 8(a)(2) means when it asks for a “short and plain
statement of the claim showing that the pleader is entitled to relief ” and how a complaint
survives a motion to dismiss for failure to state a claim upon which relief can be granted
brought under Rule 12(b)(6). The Court’s new interpretation of these rules—described
in detail below—abrogated its prior decision in Conley v. Gibson,
3
which merely required
the plaintiff to provide fair notice of the claim to the defendant.
Twombly’s significance is undeniable. According to Westlaw, as of July 31, 2015, it
has been cited in a breathtaking 118,866 judicial opinions. But despite its near universal
relevance, Twombly is of special import in antitrust cases—and, more specifically,
conspiracy cases under Section 1 of the Sherman Act.
4
Twombly itself was a Section
1 conspiracy case alleging an agreement between telephone companies to thwart
competition by preventing upstart companies from expanding in the market and by
agreeing not to compete with one another.
5
The Court’s holding in Twombly was
grounded largely in antitrust principles—so much so that it led some lower courts to
initially conclude that the rule in Twombly applied only in conspiracy cases.
6
The Supreme
Court clarified Twombly’s broader application two years later in Ashcroft v. Iqbal—notably,
over the dissent of Justice Souter, Twombly’s author.
7
This article highlights principal decisions, circuit by circuit, discussing the standards
for pleading an antitrust conspiracy under Twombly. Although some familiarity with
Twombly is assumed, Section II contains a refresher of Twombly’s facts and holding. The
heart of the article, Section III, discusses the various approaches the circuit courts have
taken with regard to Twombly. Specifically, this section is broken down into conspiracies
that are pleaded based on direct evidence (Section III.A) and—much more significantly—
conspiracies that are pleaded based on circumstantial evidence (Section III.B). Given
1 The views expressed by the authors in this article are their own and not those of any of their clients
or of Crowell & Moring LLP.
2 550 U.S. 544 (2007).
3 355 U.S. 41 (1957).
4 15 U.S.C. § 1.
5 550 U.S. at 550.
6 See, e.g., Aktieselskabet AF 21. Nov. 2001 v. Fame Jeans Inc., 525 F.3d 8, 17 (D.C. Cir. 2008) (“In sum,
Twombly was concerned with the plausibility of an inference of conspiracy, not with the plausibility
of a claim.”). This confusion was understandable. The opinion in Twombly expressly says, “We
granted certiorari to address the proper standard for pleading an antitrust conspiracy through allegations
of parallel conduct.” 550 U.S. at 553 (emphasis added).
7 556 U.S. 662 (2009).
121
that the majority of antitrust conspiracies are pleaded with circumstantial evidence, the
latter category is of distinct consequence. In this section, we strive to provide a survey
of the most important cases from each circuit to assist practitioners trying to navigate
this murky intersection between antitrust law and civil procedure. Finally, Section
IV contains our concluding remarks on the subject and ties together the key areas of
divergence that have emerged from this body of case law.
II. A BRIEF TWOMBLY CRASH COURSE
Although most readers of this article have almost certainly studied Twombly at one
point, this section provides a review of Twombly’s facts and holding.
A. The Facts
Following the 1984 divestiture of AT&T’s local telephone business, a system of
regional local monopolies known as—among other things—Incumbent Local Exchange
Carriers (ILECs) or “Baby Bells” was established.
8
For a time, the ILECs maintained their
regional monopolies for local telephone service but were excluded from the competitive
market for long-distance services.
9
This changed when the Telecommunications Act
of 1996 (“the 1996 Act”) was passed. Among other things, the 1996 Act was meant to
engender competition and “‘facilitate market entry’” into the local telephone service
markets.
10
It attempted to accomplish this goal by requiring each ILEC to share its
network with competitors—known as Competitive Local Exchange Carriers (CLECs).
11
To compensate the ILECs for this, the 1996 Act provided a path for the ILECs to enter
the competitive long-distance market.
12
In 2002, William Twombly and Lawrence Marcus filed a class-action complaint against
a group of ILECs under Section 1 of the Sherman Act.
13
The complaint alleged that the
ILECs conspired to restrain trade in two ways: (1) by “engaging in parallel conduct” to
thwart the upstart CLECs’ growth; and (2) by refraining from competing against each
other.
14
More specifically, as to the first alleged restraint of trade, the plaintiffs claimed that
the ILECs suppressed competition by making unfair agreements with the CLECs to access
ILEC networks, providing the CLECs with inferior connections to the ILEC networks,
overcharging the CLECs, and billing the CLECs in a manner intended to sabotage their
customer relationships.
15
As to the second alleged restraint of trade, the plaintiffs alleged that
the ILECs failed to pursue “attractive business opportunities” in each other’s markets. In
support, the plaintiffs referred to a public statement made by the CEO of one ILEC noting
that competing in another ILEC’s territory “might be a good way to turn a quick dollar but
8 Twombly, 550 U.S. at 549.
9 Id.
10 Id. (quoting AT & T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371 (1999)).
11 Id. at 549-50.
12 Id. at 549.
13 Id. at 550.
14 Id. at 551.
15 Id. at 550-51.
122
that doesn’t make it right.”
16
In summary, the complaint alleged that because there was no
“meaningful competition” between the ILECs in each other’s markets and because of the
“parallel course of conduct that each engaged in to prevent competition from CLECs within
their respective” markets, the defendants had entered into a conspiracy to restrain trade.
17
A district judge in the Southern District of New York dismissed the complaint under
Rule 12(b)(6) for failing to state a claim.
18
The district court held that consciously parallel
conduct, without more, did not state a claim under Section 1.
19
The court also noted that the
alleged behavior of the ILECs in resisting emerging competition was “fully explained” by
each ILEC’s economic self-interest in defending its territory.
20
The Second Circuit reversed. It
held that the district court applied the incorrect standard for evaluating a motion to dismiss.
21
The reversal was guided by the Second Circuit’s view that a plaintiff need not plead “plus
factors” in a complaint to support a conspiracy premised on parallel conduct.
22
While the
court noted that on summary judgment a plaintiff is required to come forward with such
plus factors, at the pleading stage, “we are concerned only with whether the defendants have
‘fair notice’ of the claim, and the conspiracy that is alleged as part of the claim, against them.”
23
The Supreme Court granted certiorari to review the Second Circuit’s decision.
B. The Holding
The Court reversed the Second Circuit’s ruling. It began by noting that “[t]his case
presents the antecedent question of what a plaintiff must plead in order to state a claim
under § 1 of the Sherman Act.”
24
The Court proceeded to discuss what Rule 8 requires
a complaint to contain to survive a motion to dismiss. In a now oft-quoted portion
interpreting Rules 8 and 12, the Court wrote, “While a complaint attacked by a Rule
12(b)(6) motion to dismiss does not need detailed factual allegations . . . a plaintiff’s
obligation to provide the grounds of his entitle[ment] to relief requires more than labels
and conclusions, and a formulaic recitation of the elements of a cause of action will not
do. . . . Factual allegations must be enough to raise a right to relief above the speculative
level, on the assumption that all the allegations in the complaint are true (even if doubtful
in fact).”
25
Under these general principles, the Court held that to successfully plead a
Section 1 claim, a complaint must contain “enough factual matter (taken as true) to
suggest that an agreement [to restrain trade] was made.”
26
This standard, according to
the Court, did not “impose a probability requirement at the pleading stage”; rather, the
16 Id. at 551 (internal quotation marks omitted).
17 Id.
18 Id. at 552.
19 Id.
20 Id.
21 Id. at 553.
22 Id.
23 Twombly v. Bell Atl. Corp., 425 F.3d 99, 116 (2d Cir. 2005).
24 Twombly, 550 U.S. at 554-55.
25 Id. at 555-56 (citations and internal quotation marks omitted).
26 Id. at 556.
123
allegations must “plausibly suggest[]” that an agreement was made and not be “merely
consistent with” an agreement.
27
In the context of agreements pleaded on the basis of
parallel conduct, the Court forcefully stated that “an allegation of parallel conduct and
a bare assertion of conspiracy will not suffice. Without more, parallel conduct does not
suggest conspiracy, and a conclusory allegation of agreement at some unidentified point
does not supply facts adequate to show illegality.”
28
Instead, the Court held that the
allegations of parallel conduct “need[] some setting” or “further factual enhancement” to
cross the line from possible to plausible.
29
The Court noted in a footnote, however, that
it was not applying any heightened pleading standard or attempting to broaden the scope
of Federal Rule of Civil Procedure 9 to antitrust cases or otherwise.
30
In reaching this conclusion, the Court abrogated its prior holding in Conley v. Gibson.
In particular, the Court took issue with the language in Conley stating that, “a complaint
should not be dismissed for failure to state a claim unless it appears beyond doubt that
the plaintiff can prove no set of facts in support of his claim which would entitle him to
relief.”
31
In Twombly, the Court discussed a history of misinterpreting this phrase as literal,
which according to the Court would allow any conclusory statement of a claim to survive
a motion to dismiss so long as the complaint left open any possibility of recovery.
32
The
Court was unwilling to accept this interpretation of Conley. Consequently, it held that
this language from Conley was “best forgotten as an incomplete, negative gloss on an
accepted pleading standard” and “earned its retirement.”
33
The Court then proceeded to apply these principles to the allegations in the plaintiffs’
complaint. At the very outset, the Court noted that this was a conspiracy pleaded
on parallel conduct and not on allegations of direct agreement among the ILECs.
34
It acknowledged that there were a few “stray” references to a direct agreement, but
dismissed these allegations as mere legal conclusions that need not be accepted as true by
the Court.
35
Instead, the “nub” of the complaint as read by the Court was that the ILECs’
“parallel behavior, consisting of steps to keep the CLECs out and manifest disinterest in
becoming CLECs themselves” pleaded the requisite agreement.
36
The Court disagreed
that the alleged parallel behavior sufficed to plead a plausible antitrust conspiracy.
First, the Court noted that the structure of the 1996 Act provided the ILECs
with a powerful economic incentive to resist competition in their markets. Resisting
competition, in the Court’s words, constituted “routine market conduct,” and was
27 Id. at 556-57.
28 Id.
29 Id. at 557.
30 Id. at 569 n.14
31 355 U.S. 41, 45-46 (1957) (emphasis added).
32 Twombly, 550 U.S. at 561.
33 Id.at 563.
34 Id. at 564.
35 Id. & n.9. For example, allegations that the ILECs engaged in a contract, combination or conspiracy and
agreed not to compete with one another were mere the legal conclusions referenced by the Court. Id.
36 Id. at 565.
124
fully consistent with a “natural, unilateral reaction” to preserving market dominance.
37
This principle held particularly true under the 1996 Act, which imposed cumbersome
requirements on the ILECs—most notably, forcing them to share their infrastructure
and subsidize their own competition.
38
The Court was unwilling to infer an agreement
among the defendants from “do[ing] what was only natural” in such circumstances.
39
Second, the Court was similarly unwilling to infer a conspiracy under the plaintiffs’
second theory. This was because the Court found an “obvious alternative explanation”
for the failure of the ILECs to compete with one another: monopoly was the “norm”
in telecommunications and the ILECs “were born in that world, doubtless liked the
world the way it was, and surely knew the adage about him who lives by the sword.”
40
Significantly, any ILEC that attempted to become a CLEC “faced nearly insurmountable
barriers to profitability.”
41
It therefore made no economic or practical sense for the ILECs
to become CLECs in other contiguous markets.
In a nutshell, the Court was unwilling to infer a conspiracy where the plaintiffs had not
“nudged their claims across the line from conceivable to plausible.”
42
Two years after Twombly,
in Iqbal, the Court reiterated that Twombly set the standard for “evaluating whether a complaint
is sufficient to survive a motion to dismiss” in all cases—not just antitrust conspiracy cases.
43
III. PLEADING A SECTION 1 ANTITRUST CONSPIRACY POST-TWOMBLY
A claim under Section 1 of the Sherman Act has three elements: (1) a contract,
combination, or conspiracy; (2) an unreasonable restraint of trade in the relevant market;
and (3) an accompanying injury.
44
Section 1 claims may involve a wide variety of restraints
of trade, including those to fix prices, engage in a group boycott, allocate customers or
markets, rig bids, and more.
45
This article focuses on only the first element, which was
the element at issue in Twombly, and the element most frequently litigated in conspiracy
cases. A “contract, combination, or conspiracy” may be proven by direct evidence of
agreement or through circumstantial evidence permitting the inference of an agreement.
As then-Judge Sotomayor wrote, “in the absence of direct ‘smoking gun’ evidence, a
horizontal price-fixing agreement may be inferred on the basis of conscious parallelism,
when such interdependent conduct is accompanied by circumstantial evidence and plus
factors such as defendants’ use of facilitating practices.”
46
37 Id. at 566.
38 Id.
39 Id.
40 Id. at 567-68.
41 Id.
42 Id. at 570.
43 556 U.S. 662, 669 (2009).
44 Denny’s Marina, Inc. v. Renfro Prods., Inc., 8 F.3d 1217, 1220 (7th Cir. 1993).
45 See DM Research, Inc. v. Coll. of Am. Pathologists, 170 F.3d 53, 55 (1st Cir. 1999) (“[A]lmost any
agreement between independent actors that restrains competition is potentially subject to
examination for ‘reasonableness’ under section 1.”).
46 Todd v. Exxon Corp., 275 F.3d 191, 198 (2d Cir. 2001) (Sotomayor, J.).
125
As stated in the Introduction, this section is broken down into two broader
subsections: (1) pleading a conspiracy after Twombly based on direct evidence; and (2)
pleading a conspiracy after Twombly based on circumstantial evidence. The difference is
critical. Indeed, the Court began its analysis in Twombly by drawing this very distinction:
“the complaint leaves no doubt that the plaintiffs rest their § 1 claim on descriptions of
parallel conduct and not on any independent allegation of actual agreement.”
47
In this section,
we first address what the standard is for the fortunate plaintiff who is able to plead a
conspiracy based on an “independent allegation of actual agreement.” We then survey
the circuit courts of appeal to discuss what a plaintiff in each circuit must allege to render
a claim based on circumstantial evidence “plausible” under Twombly. As will be explored
in depth, this varies—sometimes significantly—by circuit.
A. Direct Evidence
At the outset, “direct evidence” must be defined: “Direct evidence in a Section 1
conspiracy must be evidence that is explicit and requires no inferences to establish the
proposition or conclusion being asserted.”
48
Stated differently, direct evidence must “show
an explicit understanding between the [alleged conspirators] to collude.”
49
Some courts
have gone so far as to say that if there is any ambiguity in the evidence, the evidence is not
“direct”; rather, true direct evidence is “‘tantamount to an acknowledgment of guilt.’”
50
Perhaps most simply put, direct evidence is essentially a “smoking gun.”
51
Examples of
such evidence may come in the form of documents, meetings, and participant testimony.
52
Given this narrow definition and the sophistication of modern businesses, it is not
controversial to state that true direct evidence is a rarity.
53
Given the paucity of cases turning on direct evidence of conspiracy, there has not
been much occasion for courts to consider the pleading standard for such cases under
Twombly. Nevertheless, a few courts have opined on the issue. The Third Circuit led
the pack, holding that “[i]f a complaint includes non-conclusory allegations of direct
evidence of an agreement, a court need go no further on the question whether an
agreement has been adequately pled.”
54
But it is not enough to merely plead that the
47 550 U.S. at 564 (emphasis added).
48 In re Baby Food Antitrust Litig., 166 F.3d 112, 118 (3d Cir. 1999).
49 Golden Bridge Tech., Inc. v. Motorola Inc., 547 F.3d 266, 272 (5th Cir. 2008).
50 Hyland v. HomeServices of Am., Inc., 771 F.3d 310, 318 (6th Cir. 2014) (quoting In re High Fructose
Corn Syrup Antitrust Litig., 295 F.3d 651, 662 (7th Cir. 2002) (Posner, J.)).
51 Todd, 275 F.3d at 198.
52 6 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 1410a, at 69 (3d ed. 2010); see also In re Ins. Brokerage
Antitrust Litig., 618 F.3d 300 n.23 (3d Cir. 2010) (providing as an example of direct evidence of agreement “a
document or conversation explicitly manifesting the existence of the agreement in question”).
53 In re Coordinated Pretrial Proceedings in Petroleum Prods. Antitrust Litig., 906 F.2d 432, 439 (9th Cir.
1990) (noting that “direct evidence will rarely be available”); Milgram v. Loew’s, Inc., 192 F.2d 579,
583 (3d Cir. 1951) (“[I]t is rare indeed for a conspiracy to be proved by direct evidence.”); Battle v.
Lubrizol Corp., 673 F.2d 984, 992 (8th Cir. 1982) (“However, we think that it is most unlikely that
antitrust plaintis, like any other plaintis alleging conspiracy, will have direct evidence.”).
54 W. Penn. Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85, 99-100 (3d Cir. 2010); accord In re Ins.
Brokerage Antitrust Litig., 618 F.3d at 323-24 (“Allegations of direct evidence of an agreement, if
suciently detailed, are independently adequate.”).
126
defendants reached an agreement, which would constitute a mere legal conclusion: “After
Twombly, if a plaintiff expects to rely exclusively on direct evidence of conspiracy, its
complaint must plead ‘enough fact to raise a reasonable expectation that discovery will
reveal’ this direct evidence.”
55
The Second Circuit appears to have agreed with the Third
Circuit’s conclusion that direct allegations of agreement, such as a “recorded phone call
in which two competitors agreed to fix prices,” will suffice to allege the agreement
element.
56
Other district courts have also followed suit with these cases.
57
In short, there
does not appear to be much disagreement on the issue: if a complaint pleads true direct
evidence of conspiracy with sufficient factual support, this will suffice to plead the
“agreement” element on a Section 1 claim.
58
An interesting issue arises concerning whether the rigors of Twombly’s “plausibility”
requirement even apply in direct-evidence cases. On the one hand, the Fourth Circuit has
noted that “Twombly’s requirements with respect to allegations of illegal parallel conduct
are inapplicable where, as here, the concerted conduct is not a matter of inference or
dispute.”
59
On the other hand, one district court judge expressly rejected the argument that
the Twombly plausibility standard did not apply to their allegations of direct evidence.
60
That
judge held that direct evidence must meet Twombly’s plausibility standard.
61
There is a potentially useful parallel to be drawn here between the standard on
summary judgment and the standard on a motion to dismiss that may shed some light
on the direction in which the law is heading. In Matsushita Electric Industrial Co. v. Zenith
Radio Corp., the Supreme Court placed certain limits on the inferences that district
courts may draw from ambiguous conduct in an antitrust case on summary judgment.
62
But since then, several circuits have held “those limits on inferences do not apply to a
plaintiff ’s direct evidence of an unlawful agreement under § 1.”
63
And the Second Circuit
joined “at least three” of its sister circuits in noting that “summary judgment is generally
not appropriate where a plaintiff has produced direct, as opposed to circumstantial,
55 In re Ins. Brokerage Antitrust Litig., 618 F.3d at 324. In Twombly, the Supreme Court held that an
allegation that the defendants engaged in a “contract, combination or conspiracy”—while directly
alleging agreement—was a mere legal conclusion that did not suce to directly plead an agreement.
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 565-65 & n.9 (2007).
56 Mayor & City Council of Balt., Md. v. Citigroup, Inc., 709 F.3d 129, 136 (2d Cir. 2013).
57 E.g., Suture Exp., Inc. v. Cardinal Health 200, LLC, 963 F. Supp. 2d 1212, 1223-24 (D. Kan. 2013)
(“[B]ut allegations of direct evidence, that are adequately detailed, are sucient alone.”). Disclosure:
Crowell & Moring LLP was counsel for one of the defendants in this case.
58 It is worth noting that courts often reject a plainti’s characterization of its allegations as “direct
evidence” and will proceed to analyze the allegations as “circumstantial” evidence. See, e.g., Burtch
v. Milberg Factors, Inc., 662 F.3d 212, 225-30 (3d Cir. 2011); Corr Wireless Commc’ns, L.L.C. v. AT &
T, Inc., 893 F. Supp. 2d 789, 805 (N.D. Miss. 2012). Disclosure: Crowell & Moring LLP was counsel
for one of the defendants in Corr Wireless.
59 Robertson v. Sea Pines Real Estate Cos., Inc., 679 F.3d 278, 290 (4th Cir. 2012).
60 LaFlamme v. Societe Air France, 702 F. Supp. 2d 136 (E.D.N.Y. 2010).
61 Id.
62 475 U.S. 574, 587-88 (1986).
63 Toledo Mack Sales & Serv., Inc. v. Mack Trucks, Inc., 530 F.3d 204, 219-20 (3d Cir. 2008).
127
evidence of an agreement to fix prices.”
64
It is likely that over time, courts will further
explore the issue of whether a true “plausibility” analysis is required in direct-evidence
cases at the pleading stage.
B. Circumstantial Evidence
As discussed, direct evidence of a conspiracy is exceedingly difficult to come by. For
that reason, “[d]irect evidence of conspiracy is not a sine qua non. . . . Circumstantial
evidence can establish an antitrust conspiracy.”
65
Courts have creatively riffed on the notion
that circumstantial evidence will often be the only way to prove an antitrust conspiracy.
66
If direct evidence has been narrowly defined to be “tantamount to an acknowledgment
of guilt,” circumstantial evidence has been described as “everything else including
ambiguous statements.”
67
In order to prove a conspiracy, this nebulous and large body
of potential circumstantial evidence—whatever form it may take—must show a “unity
of purpose or a common design and understanding, or a meeting of minds in an
unlawful arrangement.”
68
As discussed above, at the motion to dismiss stage, Twombly
requires that a plaintiff allege parallel conduct in addition to “some setting suggesting
the agreement necessary to make out a § 1 claim”—a “further circumstance pointing
toward a meeting of the minds.”
69
This standard raises a bevy of issues such as the weight
afforded to conflicting inferences, what allegations must be accepted as true, the extent
that allegations of “plus factors” are required, the level of factual specificity required,
and more. Many circuit courts have written detailed opinions analyzing these issues in
the context of a Section 1 claim after Twombly. They have not been completely uniform
in answering the questions that inhere in conspiracies pleaded based on circumstantial
evidence. Below, we address what we view as the most important opinions from circuits
that have ruled on the issue.
1. First Circuit
The First Circuit had occasion to address the standard for pleading an antitrust
conspiracy in Evergreen Partnering Group, Inc. v. Pactiv Corp., a group boycott case.
70
Relying
on Twombly, the district court dismissed Evergreen’s complaint and held that Evergreen had
failed to plausibly allege that the Defendants had entered into an agreement to boycott it.
64 In re Publ’n Paper Antitrust Litig., 690 F.3d 51, 63-64 (2d Cir. 2012).
65 In re Text Messaging Antitrust Litig., 630 F.3d 622, 629 (7th Cir. 2010); see also U.S. v. Falsta Brewing
Corp., 410 U.S. 526, 534 n.13 (1973) (noting that “circumstantial evidence is the lifeblood of
antitrust law”).
66 See, e.g., Esco Corp. v. U.S., 340 F.2d 1000, 1007 (9th Cir. 1965) (“A knowing wink can mean more than
words.”); Park v. El Paso Bd. of Realtors, 764 F.2d 1053, 1059 (5th Cir. 1985) (“It has been said that a conspiracy
need not be hatched in the dark of the night by men in conical hats.”); In re Delta/AirTran Baggage Fee Antitrust
Litig., 733 F. Supp. 2d 1348, 1360 (N.D. Ga. 2010) (“Plaintis need not allege the existence of collusive
communications in ‘smoke-lled rooms’ in order to state a § 1 Sherman Act claim.”).
67 In re High Fructose Corn Syrup Antitrust Litig., 295 F.3d 651, 662 (7th Cir. 2002) (emphasis in original).
68 Am. Tobacco Co. v. U.S., 328 U.S. 781, 810 (1946).
69 550 U.S. 544, 557 (2007).
70 720 F.3d 33 (1st Cir. 2013). Disclosure: At his prior rm, Jordan Ludwig was counsel for Evergreen
in this appeal.
128
Specifically, the district court held that “‘as in Twombly, there are legitimate business reasons
that can as easily explain defendants’ refusal to deal with Evergreen or to compete with one
another for market share as can any insinuation of a conspiratorial agreement.’”
71
The First Circuit reversed the district court’s dismissal. It noted early in its analysis
that the distinction between alleging “merely” parallel conduct and alleging a “plausible
agreement” has “elicited considerable confusion among the lower courts as to how much
of a ‘setting’ is required to sufficiently contextualize an agreement in the absence of direct
evidence.”
72
The court identified the “slow inf lux” of what it perceived as “unreasonably
high pleading requirements at the earliest stages of antitrust litigation”—due, in its view,
to citations to case law at the summary judgment and trial stages of litigation.
73
After
summarizing the state of the law, the court concluded that under Twombly a plaintiff
may not rest its complaint exclusively on parallel conduct alone; rather, it must allege the
“general contours” of when an agreement was made and support those allegations with
a “context that tends to make said agreement plausible.”
74
Explaining further, the First
Circuit specified that a plaintiff need not allege plus factors at the pleading stage—although
such allegations may assist a court in evaluating the plausibility of an agreement.
75
The
court expressed sympathy to antitrust plaintiffs, stating that plus-factor evidence has
become “increasingly complex[]” and would “not likely be available” at the pleading
stage.
76
Notably, the First Circuit also held that on a motion to dismiss, the plaintiff ’s
allegations “need not make any unlawful agreement more likely than independent action
nor need they rule out the possibility of independent action” because, in the court’s view,
this would “frustrate the purpose of antitrust legislation and the policies informing it.”
77
Based on these principles, the First Circuit vacated the district court’s dismissal of
Evergreen’s complaint. The court found that Evergreen’s allegations of agreement went
“much further” than the allegations in Twombly and provided the necessary context to
infer a plausible conspiracy.
78
The court enumerated a number of allegations that it
believed differentiated Evergreen’s complaint from the complaint in Twombly.
79
In view of
these allegations, the First Circuit concluded that the district court “improperly applied
a heightened pleading standard” and “improperly occupied a factfinder role when it
both chose among plausible alternative theories interpreting defendants’ conduct and
adopted as true allegations made by defendants in weighing the plausibility of theories
put forward by the parties.”
80
The court also took issue with the fact that the district court
evaluated defendants’ proffered “legitimate business reasons” against the complaint’s
71 Id. at 42 (quoting Evergreen Partnering Grp., Inc. v. Pactiv Corp., 865 F. Supp. 2d 133, 140 (D. Mass. 2012)).
72 Id. at 43-44.
73 Id. at 44.
74 Id. at 46.
75 Id. at 46-47.
76 Id. at 47.
77 Id.
78 Id.
79 See id. at 48-49.
80 Id. at 50.
129
conf licting allegations.
81
In summary, the First Circuit held that the district court had
erred in acting as a factfinder, demanding detailed allegations, and weighing inferences
in the defendants’ favor.
82
2. Second Circuit
The Second Circuit has considered Twombly on several occasions. First, shortly after
Twombly was decided, the Second Circuit affirmed the dismissal of the complaint in In re
Elevator Antitrust Litigation.
83
The court noted that “‘[c]onsiderable uncertainty’ surrounds
the breadth of the Supreme Court’s recent decision in Twombly.”
84
But this case did not
contain any detailed analysis of Twombly. In the court’s own words, “we need not draw
fine lines here.”
85
The court made short shrift of the plaintiffs’ claims, disregarding the
conclusory allegations of agreement and rejecting the argument that parallel conduct
allowed a conspiracy to be inferred.
86
The Second Circuit gave Twombly a far more fulsome analysis in two subsequent cases:
Starr v. Sony BMG Music Entertainment,
87
a price-fixing case, and Anderson News, L.L.C. v.
American Media, Inc., a group boycott case.
88
Because the two cases set forth similar (and,
in our view, consistent) principles, and because both reverse the district court’s dismissal
of the plaintiff ’s complaint under Rule 12(b)(6), we discuss only Anderson News because
it is more recent, more detailed, and builds on the opinion in Starr.
Anderson News involved an alleged conspiracy by the plaintiff ’s suppliers and
business competitors to boycott the plaintiff and drive it out of business. In particular,
Anderson—a wholesaler of single-copy magazines—complained that following its
announcement of an upstream distribution surcharge, magazine publishers, distributors,
and one of Anderson’s competitors conspired to cut off Anderson’s supply and drive it
out of business.
89
The district court held that under Twombly, the conspiracy alleged by
Anderson was facially implausible and dismissed the complaint.
90
The Second Circuit reversed the dismissal. The court’s analysis began by providing
a detailed explication of Twombly’s mandates. Off the bat, the court wrote that it would
not hold a plaintiff to summary judgment or trial standards on a motion to dismiss:
“to present a plausible claim at the pleading stage, the plaintiff need not show that its
81 Id.
82 Recently, the district court dismissed Evergreen’s case on summary judgment. Evergreen Partnering
Grp., Inc. v. Pactiv Corp., No. 11-10807, 2015 WL 4205293 (D. Mass. July 10, 2015). Evergreen led
a notice of appeal.
83 502 F.3d 47 (2d Cir. 2007).
84 Id. at 50 (quoting Iqbal v. Hasty, 490 F.3d 143, 155 (2d Cir. 2007)).
85 Id.
86 Id. at 50-51.
87 592 F.3d 314 (2d Cir. 2010).
88 680 F.3d 162 (2d Cir. 2012).
89 Id. at 168-72.
90 Id. at 167.
130
allegations suggesting an agreement are more likely than not true or that they rule out
the possibility of independent action, as would be required at later litigation stages.”
91
Second, the court noted that circumstantial allegations of conspiracy are often subject
to divergent interpretations. But the court explained that district courts may not choose
between these conf licting inferences on a Rule 12(b)(6) motion, even if it finds the
defendant’s version of the events more plausible.
92
Finally, the court emphasized that
district courts must accept the factual allegations in the complaint as true—again, even
if the veracity of the allegations seems doubtful.
93
According to the Second Circuit, the district court went astray in applying
Twombly. Most notably, it held that the district court had improperly “cho[se] among
plausible alternatives,” which it was not permitted to do on a motion to dismiss—rather,
“[t]he question at the pleading stage is not whether there is a plausible alternative to the
plaintiff ’s theory; the question is whether there are sufficient factual allegations to make the
complaint’s claim plausible.”
94
Second, the court stated that the district court had “essentially”
made factual findings at the pleading stage.
95
Unlike the district court, the Second Circuit
found Anderson’s complaint “vastly different from the complaint at issue in Twombly.
96
Of
note to the court was the fact that Anderson had alleged that all of the defendants ceased
dealing with it in lockstep and included certain dates and individuals (from the defendant
companies) who had met in the two-week period prior to defendants’ cancellation of
Anderson.
97
The court also found persuasive Anderson’s allegations of certain statements the
defendants had made to Anderson and a similarly situated wholesaler.
98
Because Anderson’s allegations were plausible, “the district court could not properly
make an interpretive finding on a Rule 12(b)(6) motion.”
99
In sum, it appears that the
Second Circuit is also of the view that district courts may not weigh competing plausible
inferences and may not render factual findings on a motion to dismiss.
100
91 Id. at 184.
92 Id. at 185.
93 Id. One principle that we add from Starr not mentioned in Anderson News is that the Second Circuit has
rejected the notion that Twombly requires that “a plainti identify the specic time, place, or person related
to each conspiracy allegation” where the claim rests on parallel conduct. 592 F.3d 314, 325 (2d Cir. 2010).
94 Anderson News, 680 F.3d at 189-90.
95 Id. at 190.
96 Id. at 186-87.
97 Id. at 187.
98 Id. at 187-88.
99 Id.
100 In fact, the First Circuit relied heavily on Anderson News in deciding Evergreen. See Evergreen Partnering
Group, Inc. v. Pactiv Corp., 720 F.3d 33, 45-46 (1st Cir. 2013). Finally, the district court recently
dismissed Anderson’s case on summary judgment. Anderson News, L.L.C. v. Am. Media, Inc., No. 09
Civ. 2227 PAC, 2015 WL 4991868 (S.D.N.Y. Aug. 20, 2015). Anderson has led a notice of appeal.
131
3. Third Circuit
The Third Circuit has given in-depth consideration to pleading antitrust conspiracy
based on circumstantial evidence on two occasions. The first was in In re Insurance Brokerage
Antitrust Litigation—an alleged customer-allocation scheme among the defendant insurers.
101
In In re Insurance Brokerage Antitrust Litigation, after summarizing Section 1’s
requirements and Twombly’s holding, the Third Circuit quickly raised an important issue—
the relationship between the pleading standard and the summary judgment standard in
antitrust cases. In answering that question, the court wrote, “We think Twombly aligns
the pleading standard with the summary judgment standard in at least one important way:
Plaintiffs relying on circumstantial evidence of an agreement must make a showing at both
stages (with well-pled allegations and evidence of record, respectively) of ‘something more
than merely parallel behavior,’ something ‘plausibly suggest[ive of ] (not merely consistent
with) agreement.”
102
The court went on to note that if obvious alternative explanations
existed for the facts alleged, the allegations of conspiracy are not plausible.
103
In this
sense, the court was limiting the range of permissible inferences that a district court can
draw from ambiguous evidence—much like on summary judgment and at trial.
104
As far
as plus-factor evidence was concerned, the Third Circuit held that plaintiffs relying on
circumstantial evidence of conspiracy must allege facts that, if true, would establish at
least one “plus factor.”
105
The court summarized its reading of Twombly as follows: “In sum,
Twombly makes clear that a claim of conspiracy predicated on parallel conduct should be
dismissed if ‘common economic experience,’ or the facts alleged in the complaint itself,
show that independent self-interest is an ‘obvious alternative explanation’ for defendants’
common behavior.”
106
Based on this standard, the Third Circuit affirmed the district court’s
dismissal of the plaintiffs’ antitrust claims except those involving bid rigging.
107
The Third Circuit differs from the First and Second Circuits in that the pleading
standard is more closely aligned with the summary judgment standard. A plaintiff
must allege facts supporting plus-factor evidence and must dispel obvious alternative
explanations for the defendants’ conduct.
101 618 F.3d 300 (3d Cir. 2010). The Third Circuit again addressed Twombly in detail in Burtch v. Milberg
Factors, Inc., 662 F.3d 212 (3d Cir. 2011). This opinion, however, relies very heavily on In re Insurance
Brokerage Litigation, and a detailed discussion of Burtch would be cumulative. Consequently, we do
not discuss that decision here.
102 618 F.3d at 322 (citations omitted); see also Superior Oshore Int’l, Inc. v. Bristow Grp., Inc., 490 F.
App’x 492, 499 (3d Cir. 2012) (same).
103 In re Insurance Brokerage Antitrust Litig., 618 F.3d at 322-23.
104 Id. at 361.
105 Id. at 323.
106 Id. at 326.
107 Id. at 336-37, 361-62. Because of the opinion’s factual complexity, we nd it beyond the scope of
this article to address those facts here.
132
4. Fourth Circuit
The Fourth Circuit’s most significant consideration of Twombly in a circumstantial
pleaded conspiracy case comes in the unpublished decision of Loren Data Corp. v. GXS,
Inc.
108
In that case, Loren Data alleged that GXS engaged in a concerted refusal to deal
with it in the electronic data interchange industry.
109
The district court dismissed Loren
Data’s complaint, holding that Loren Data had failed to allege specific facts to support a
Section 1 conspiracy.
110
The Fourth Circuit affirmed the district court’s dismissal. The court first reviewed
Twombly’s principles and the general law under Section 1—that is, “when concerted
conduct is a matter of inference, a plaintiff must include evidence that places the parallel
conduct in ‘context that raises a suggestion of a preceding agreement’ as ‘distinct from
identical, independent action.’”
111
It concluded that Loren Data had failed to provide any
allegations suggesting circumstantial evidence of a conspiracy. Citing to the Supreme
Court’s decision in Matsushita, the Fourth Circuit stated that the “reviewing court
must ‘take account of the absence of a plausible motive to enter into the alleged . . .
conspiracy.’”
112
The court went on to hold that if the alleged conspirators did not have
a rational, economic motive to conspire, and their conduct was consistent with equally
plausible lawful explanations, the court could not infer a conspiracy.
113
For this reason,
the court concluded, the complaint’s allegations “must tend to exclude the possibility
that the alleged co-conspirators acted independently, and the alleged conspiracy must
make practical, economic sense.”
114
Under this standard, the Fourth Circuit concluded
that Loren Data’s allegations contradicted any inference of conspiracy. In particular, the
Fourth Circuit found that the allegations “ref lect[ed] GXS’s unilateral business judgment
as to the parameters under which it was willing to deal with Loren Data” and the
conspiracy as alleged “simply ma[de] no practical economic sense.”
115
In sum, assuming published decisions in the Fourth Circuit follow Loren Data, a
plaintiff in the Fourth Circuit must plead a plausible economic motive to conspire and
the allegations must tend to exclude the possibility that the conduct was unilateral—
similar to summary judgment standards.
108 501 F. App’x 275 (4th Cir. 2012). The Fourth Circuit also considered Twombly in Robertson v. Sea
Pines Real Estate Companies, but that case, which is cited above, rested on direct evidence. See
679 F.3d 278, 289 (4th Cir. 2012) (“Circumstantial evidence sucient to ‘suggest[] a preceding
agreement,’ is thus superuous in light of the direct evidence in the by-laws of the agreement itself.”
(citation omitted)).
109 Loren Data, 501 F. App’x at 277.
110 Id. at 278.
111 Id. at 281 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
112 Id. (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 595 (1986)).
113 Id. at 280-281.
114 Id. at 281.
115 Id.
133
5. Fifth Circuit
The Fifth Circuit has not issued a detailed opinion on Twombly in the context
of pleading an antitrust conspiracy. Nevertheless, the Fifth Circuit was faced with a
Twombly issue in an antitrust conspiracy in Marucci Sports, L.L.C. v. National Collegiate
Athletic Association, which provides some—but not detailed—guidance.
116
In Marucci
Sports, the plaintiff alleged that the NCAA and the National Federation of State High
School Associations (“NFHS”) conspired to design the standard for non-wood baseball
bats—known as the BBCOR standard—to favor incumbent competitors and exclude
new market entrants such as Marucci.
117
After several of Marucci’s bats failed compliance
testing on multiple occasions, it sued under Section 1, and the district court dismissed its
case on Rule 12 motion to dismiss.
118
The Fifth Circuit stated outright that “[a]ntitrust claims do not necessitate a higher
pleading standard and a plaintiff need only plead enough facts to state a claim to relief that
is plausible on its face.”
119
Nevertheless, the court affirmed the district court’s dismissal. In
the court’s view, the plaintiff needed to plead facts showing that the alleged concerted
action resulted from an agreement to unreasonably restrain trade.
120
While Marucci alleged
that the NCAA and NFHS had engaged in a conspiracy to enforce the BBCOR standard
to exclude new market entrants and favor the incumbent manufacturers, the Fifth Circuit
dismissed these allegations as insufficient.
121
The court noted that the complaint had
failed to allege any “specific facts” demonstrating the intent to engage in a conspiracy.
122
Without these specific facts, the Fifth Circuit was unwilling to differentiate Marucci’s
case from Twombly, and found that the “various conclusory allegations . . . support one of
many inferential possibilities.”
123
Marucci Sports provides some guidance, but not a detailed
blueprint for district courts and practitioners evaluating an antitrust conspiracy.
124
6. Sixth Circuit
The Sixth Circuit has perhaps given more detailed consideration to the Twombly
standard than any other; it has written detailed opinions on Twombly in the antitrust
context on four occasions. These opinions have arguably resulted in an intracircuit split
of authority. Rather than discussing each of these cases in detail, we instead summarize
the most important rules that each announced.
116 751 F.3d 368 (5th Cir. 2014).
117 Id. at 372.
118 Id. at 372-73.
119 Id. at 373 (citations and internal quotation marks omitted).
120 Id. at 375.
121 Id.
122 Id. (emphasis in original).
123 Id.
124 A more extensive Twombly analysis in the Fifth Circuit is found in the case of Lormand v. US
Uniwired, Inc., 565 F.3d 228 (5th Cir. 2009)—a securities fraud case. In Lormand, the Fifth Circuit
held, among other things, that when evaluating the element of loss causation in a securities fraud
case, “we are not authorized or required to determine whether the plainti’s plausible inference of
loss causation is equally or more plausible than other competing inferences.” Id. at 266.
134
The Sixth Circuit first confronted Twombly in a Section 1 case in Total Benefits
Planning Agency, Inc. v. Anthem Blue Cross and Blue Shield, a group boycott case.
125
Most
significantly, the court in Total B enef its held that a plaintiff cannot offer “bare allegations”
of agreement without any reference to the “who, what, where, when, how or why” of
the alleged conspiracy.
126
The Sixth Circuit faulted the plaintiff for failing to allege when
each defendant joined the conspiracy, where or how each defendant joined the conspiracy,
and for what purpose they joined the conspiracy.
127
Similarly, the court criticized the
plaintiff for failing to identify the individuals who allegedly made certain statements
that facilitated the alleged boycott and for not explaining where or when the conspiracy
occurred during the alleged conspiracy period.
128
For these reasons, the Sixth Circuit
affirmed the dismissal of the plaintiff ’s complaint.
The court revisited Twombly the following year in In re Travel Agent Commission
Antitrust Litigation, a case brought by a putative class of travel agents who alleged that the
defendant airlines conspired to reduce, cap, and eliminate the payment of commissions to
plaintiffs.
129
According to the Sixth Circuit, which affirmed the dismissal of the plaintiffs’
complaint, “The Twombly decision provides an additional safeguard against the risk of
‘false inferences from identical behavior’ at an earlier stage of the trial sequence—the
pleading stage.”
130
Of greatest note, relying on Matsushita, the court wrote that “the
plausibility of plaintiffs’ conspiracy claim is inversely correlated to the magnitude of
defendants’ economic self-interest.”
131
Based on this principle and certain allegations
and evidence, the Sixth Circuit concluded that “it is just as likely that American’s 2001
commission cap was an effort to reduce its internal commission costs, with the ancillary
hope that its competitors would follow its lead” as the alleged conspiracy.
132
Finally, the
court found that the plaintiff ’s allegations lacked the necessary detail to “nudge” the claim
from conceivable to plausible.
133
For instance, the plaintiffs failed to allege any “specific
meetings” involving the remaining defendants other than trade association meetings,
which the Sixth Circuit held was insufficient under Twombly.
134
Despite an impassioned
dissent from Judge Merritt—who wrote that “district courts across the country have
dismissed a large majority of Sherman Act claims on the pleadings misinterpreting the
standards from Twombly and Iqbal, thereby slowly eviscerating antitrust enforcement
under the Sherman Act
135
—two judges voted to affirm the district court’s dismissal.
125 552 F.3d 430 (6th Cir. 2008).
126 Id. at 437.
127 Id. at 436.
128 Id.
129 583 F.3d 896 (6th Cir. 2009).
130 Id. at 904.
131 Id. at 909.
132 Id. at 910.
133 Id.
134 Id. at 910-11.
135 Id. at 914 (Merritt, J., dissenting).
135
One year later, in Watson Carpet & Floor Covering, Inc. v. Mohawk Industries, Inc., the
Sixth Circuit again considered the Twombly standard in another group boycott case.
136
But
unlike in the prior two cases, this time, the Sixth Circuit reversed the district court’s
dismissal in an opinion arguably premised on a different interpretation of Twombly. Most
importantly here, the Sixth Circuit was unwilling to adopt the inference-weighing
approach used in prior cases. The district court found that the defendant had offered
“an eminently plausible reason for the refusal to deal”—namely that the plaintiff had
previously sued the defendant.
137
On review, however, the Sixth Circuit rejected this line
of reasoning. It wrote, “Often, defendants’ conduct has several plausible explanations.
Ferreting out the most likely reason for the defendants’ actions is not appropriate at the
pleading stage. In this case, the plausibility of Watson Carpet’s litigiousness as a reason for
the refusals to sell carpet does not render all other reasons implausible.”
138
In sum, unlike
in In re Travel Agent Commission Antitrust Litigation, this panel of judges was unwilling to
weigh—or “ferret out”—the various inferences that arose from the defendant’s conduct.
Finally, the Sixth Circuit’s most recent Twombly opinion was Erie County, Ohio
v. Morton Salt, Inc.
139
Even though the Sixth Circuit ultimately affirmed dismissal of
the plaintiff ’s complaint, it criticized the district court for “not clearly distinguish[ing]
between the antitrust standards applicable on summary judgment and those that apply
to a motion to dismiss.”
140
The appellate court clarified two important points. First, it
noted that “at the pleading stage, the plaintiff is not required to allege facts showing
that an unlawful agreement is more likely than lawful parallel conduct.”
141
In the court’s
view, all that a plaintiff must plead are facts sufficient to “raise a plausible inference of an
unlawful agreement to restrain trade.”
142
Second, the court held that, “in order to state
a Section One claim, a plaintiff need not allege a fact pattern that ‘tends to exclude the
possibility’ of lawful, independent conduct.”
143
The court noted that this language was
drawn from summary judgment and trial decisions and that in Twombly, the Supreme
Court “nowhere held that the same standard applies on a motion to dismiss.”
144
And in
the panel’s view, “[i]f a plaintiff were required to allege facts excluding the possibility
of lawful conduct, almost no private plaintiff’s complaint could state a Section One
claim” because “a plaintiff is very unlikely to have factual information that would
exclude the possibility of non-conspiratorial explanations before discovery.”
145
Despite this
seemingly more expansive pleading standard, the Sixth Circuit affirmed the dismissal
of the plaintiff ’s complaint. It first found that allegations of suspicious bidding patterns
136 648 F.3d 452 (6th Cir. 2011).
137 Id. at 458.
138 Id.
139 702 F.3d 860 (6th Cir. 2012).
140 Id. at 868.
141 Id.
142 Id. at 869.
143 Id.
144 Id.
145 Id.
136
mirrored the “failure-to-compete claim that Twombly rejected.”
146
It then rejected the
plaintiff ’s sham-bidding claim in view of a unique “Buy Ohio” law; according to the
court, the plaintiff ’s sham-bidding theory “makes sense only in a market subject to the
lockout interpretation of the Buy Ohio law.”
147
As these four cases demonstrate, there appears to be some disagreement within the
Sixth Circuit regarding what a plaintiff is required to plead under Twombly and how far
a district court may go in ruling on a motion to dismiss.
7. Seventh Circuit
The Seventh Circuit considered the Twombly pleading standing in the context of an
antitrust conspiracy in In re Text Messaging Antitrust Litigation—an opinion written by Judge
Posner.
148
Text Messaging was an interlocutory appeal from the denial of the defendants’ motion
to dismiss in a series of cases alleging a conspiracy to fix the prices of text messaging services.
In deciding to accept the interlocutory appeal, Judge Posner wrote that, “Pleading standards
in federal litigation are in ferment after Twombly and Iqbal, and therefore an appeal seeking
a clarifying decision that might head off protracted litigation is within the scope of section
1292(b).”
149
The Seventh Circuit affirmed the district court’s denial of the defendants’ motion
to dismiss and provided its explanation of the Twombly pleading standard.
The court endeavored to explain the difference between “plausibility,” “probability,” and
“possibility,” as used in Twombly. In the court’s view, these terms were all “a little unclear” because
they all overlap.
150
Judge Posner wrote, “Probability runs the gamut from a zero likelihood to
a certainty. What is impossible has a zero likelihood of occurring and what is plausible has a
moderately high likelihood of occurring. The fact that the allegations undergirding a claim
could be true is no longer enough to save a complaint from being dismissed; the complaint must
establish a nonnegligible probability that the claim is valid; but the probability need not be as
great as such terms as ‘preponderance of the evidence’ connote.”
151
Under this standard, the Seventh Circuit concluded that the plaintiffs had alleged a
plausible conspiracy. Of note to the court was the fact that the plaintiffs had alleged a mix
of parallel behaviors, details of the industry structure, and certain industry practices (such
as the exchange of price information at trade association meetings), that all “facilitate
collusion.”
152
The court similarly found persuasive allegations that the defendants
allegedly changed their pricing structures and increased their prices simultaneously in
the face of falling costs—behavior that the court found “anomalous” under economic
principles.
153
Finally, the court regarded all of these allegations as circumstantial evidence,
146 Id. at 870.
147 Id. at 872.
148 630 F.3d 622 (7th Cir. 2010).
149 Id. at 627.
150 Id. at 629.
151 Id.
152 Id. at 627-28.
153 Id. at 628.
137
and noted its limited role on a motion to dismiss in evaluating such evidence: “We need
not decide whether the circumstantial evidence that we have summarized is sufficient to
compel an inference of conspiracy; the case is just at the complaint stage and the test for
whether to dismiss a case at that stage turns on the complaint’s ‘plausibility.’”
154
And, in
fact, when confronted with a greater record on summary judgment, the Seventh Circuit
recently affirmed the dismissal of this case.
155
8. Eighth Circuit
The Eighth Circuit has not issued a highly detailed opinion analyzing Twombly in the
antitrust sphere but has just recently issued two opinions touching on the subject. First,
in Robbins v. Becker, the court affirmed the dismissal of a complaint alleging a Section
1 conspiracy as one of many claims, but this opinion contains only a cursory analysis
of Twombly.
156
Just over two weeks later, the court issued a significantly more in-depth
opinion in Insulate SB, Inc. v. Advanced Finishing Systems, Inc.
157
This opinion affirmed
the dismissal of a Section 1 case alleging that a manufacturer and its distributors violated
Section 1 through “agreements in restraint of trade” to “reduce competition.”
158
More
specifically, the plaintiff complained that the manufacturer’s alleged threats in two letters
not to deal with any of its distributors that carried a competitor’s product violated Section
1.
159
The Eighth Circuit was not persuaded.
In reviewing the legal standard, the court wrote, “Given the unusually high cost
of discovery in antitrust cases, the limited success of judicial supervision in checking
discovery abuse, and the threat that discovery expense will push cost-conscious
defendants to settle even anemic cases, the federal courts have been reasonably aggressive
in weeding out meritless antitrust claims at the pleading stage.”
160
With this lens, the
court proceeded to first analyze the alleged “written” exclusive agreements. The court
concluded that the complaint merely “contain[ed] several conclusory references to a
contract” but “the alleged facts do not suggest [the manufacturer] entered into explicit
exclusivity agreements with any distributors.”
161
The court rejected the notion that the
manufacturer’s unilateral announcement that it would not sell to distributors who also
sold a competitor’s products—an announcement made after it signed the distribution
agreements—could “transform a prior innocuous distributor agreement into a contract
for exclusive dealing” to support an inference of an agreement not to compete.
162
Second, the court considered the plaintiff ’s claim that the manufacturer’s letters and the
distributors’ compliance with those letters’ suggestions could circumstantially evidence
a conspiracy. It rejected the plaintiff ’s “vague references to concerted action” among
154 Id. at 629.
155 In re Text Messaging Antitrust Litig., 782 F.3d 867 (7th Cir. 2015).
156 No. 14-1435, 2015 WL 4508749 (8th Cir. July 27, 2015).
157 No. 14-2451, 2015 WL 4760287 (8th Cir. Aug. 13, 2015).
158 Id. at *2.
159 Id.
160 Id. at *3 (citations and internal quotation marks omitted).
161 Id. at *4.
162 Id.
138
certain distributors for failing to “provide any factual allegations beyond the bare
conclusion that there was a conspiracy.”
163
The court found lacking allegations such as
“when the agreements occurred” and “which of the distributors named as defendants—if
any—are among the ‘key distributors’ who were party to the agreements.”
164
In sum, the
Eighth Circuit concluded that repeated allegations that an “unnamed set of distributors
generally conspired to restrain trade,” did not provide the “‘factual enhancement’
necessary to move [the] complaint forward.”
165
Neither Robbins nor Insulate make it entirely clear where the Eighth Circuit lands on
the post-Twombly spectrum. It bears noting that in another context, the Eighth Circuit
“refuse[d] . . . to incorporate some general and formal level of evidentiary proof into the
‘plausibility’ requirement of Iqbal and Twombly.”
166
Given some of the language in Insulate,
it is possible that the Eighth Circuit will demand a higher degree of factual specificity
from antitrust plaintiffs.
9. Ninth Circuit
The Ninth Circuit has issued a series of rulings—two within the past few months—that
when read in conjunction, help define the pleading standard in the Ninth Circuit. The first
of these cases is Kendall v. Visa U.S.A., Inc., a Section 1 case decided shortly after Twombly that
alleged a conspiracy to set the fees charged to merchants for the payment of credit card sales.
167
In Kendall, the Ninth Circuit made clear that after Twombly, a plaintiff must plead “not just
ultimate facts (such as a conspiracy), but evidentiary facts.”
168
According to the court, “[a] bare
allegation of a conspiracy is almost impossible to defend against.”
169
Although the court does
not spend much time analyzing Twombly, it affirmed the dismissal of the plaintiff’s complaint
because the plaintiff had failed to allege any such evidentiary facts. Notably, the court wrote,
“the complaint does not answer the basic questions: who, did what, to whom (or with whom),
where, and when?”
170
At bottom, the court found that the plaintiffs had alleged no more than
parallel conduct, which is insufficient under Twombly.
171
Very recently, the Ninth Circuit had occasion to again consider the Twombly standard
in name.space, Inc. v. Internet Corp. for Assigned Names and Numbers.
172
And again, it did
not thoroughly analyze the appropriate standard for pleading an antitrust conspiracy.
But, in reliance on Kendall, Matsushita, and other Ninth Circuit case law interpreting
Twombly, the court affirmed the Rule 12(b)(6) dismissal of the plaintiff ’s complaint. Most
importantly here, the Ninth Circuit held that “ICANN’s decision-making was fully
163 Id. at *6.
164 Id.
165 Id. at *7 (quoting Twombly, 550 U.S. at 557).
166 Whitney v. Guys, Inc., 700 F.3d 1118, 1128 (8th Cir. 2012).
167 518 F.3d 1042 (9th Cir. 2008).
168 Id. at 1047.
169 Id.
170 Id. at 1048.
171 Id.
172 No. 13-55553, 2015 WL 4591897 (9th Cir. July 31, 2015).
139
consistent” with rational and lawful business behavior.
173
Specifically, the court cited its
prior decision in a civil RICO case standing for the proposition that “courts must consider
obvious alternative explanations for a defendant’s behavior when analyzing plausibility.”
174
Under these principles, the Ninth Circuit was unwilling to “infer an illegal agreement
with outside interests simply because ICANN’s rational business decisions favor the status
quo rather than name.space’s untested alternative business model.”
175
Most recently, the Ninth Circuit affirmed the district court’s Rule 12(b)(6) dismissal
in In re Musical Instruments and Equipment Antitrust Litigation.
176
This case alleged a “hub-
and-spoke” conspiracy between a musical-instrument retailer and several musical-
instrument manufacturers.
177
After addressing the law behind such conspiracies, the court
noted that it was principally concerned with the alleged horizontal agreements between
the manufacturers—that is, the “rim” of the conspiracy.
178
The Ninth Circuit began its plausibility analysis by noting that parallel conduct,
“such as competitors adopting similar policies around the same time in response to
similar market conditions[] may constitute circumstantial evidence of anticompetitive
behavior.”
179
But, the court noted, “Twombly takes into account the economic reality
that mere parallel conduct is as consistent with agreement among competitors as it is
with independent conduct in an interdependent market.”
180
Explaining further, the
court wrote, “In an interdependent market, companies base their actions in part on the
anticipated reactions of their competitors. And because of this mutual awareness, two
firms may arrive at identical decisions independently, as they are cognizant of—and
reacting to—similar market pressures.”
181
According to the court, certain plus factors—
that is, “economic actions and outcomes that are largely inconsistent with unilateral
conduct but largely consistent with explicitly coordinated action”—can place allegations
of parallel conduct in a context suggesting agreement.
182
173 Id. at *4.
174 Id. (citing Eclectic Props. E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 996 (9th Cir. 2014)) (emphasis
added). Before Eclectic Properties, the Ninth Circuit had held similarly in a prior securities case explaining
Twombly and Iqbal: “When faced with two possible explanations, only one of which can be true and
only one which results in liability, plaintis cannot oer allegations that are ‘merely consistent with
their favored explanation but are also consistent with the alternative explanation. Something more
is needed, such as facts tending to exclude the possibility that the alternative explanation is true, on
order to render plaintis’ allegations plausible within the meaning of Iqbal and Twombly.” In re Century
Aluminum Co. Securities Litig., 729 F.3d 1104, 1108 (9th Cir. 2013).
175 Id. at *5.
176 No. 12-56674, 2015 WL 5010644 (9th Cir. Aug. 25, 2015). Disclosure: Crowell & Moring LLP was
counsel for one of the defendants in this litigation.
177 Id. at *4.
178 Id. at *3-*4.
179 Id. at *5.
180 Id.
181 Id.
182 Id.
140
The plaintiffs attempted to allege six different plus factors: (1) a common motive
to conspire; (2) actions against self-interest; (3) simultaneous adoption of a policy; (4)
an FTC investigation and decree; (5) participation in a trade association; and (6) rising
retail prices as the number of units sold declined.
183
Relying on Twombly, the court
rejected each in turn. For instance, it held that a common motive to collude “does
not suggest an agreement” because “alleging ‘common motive to conspire’ simply
restates that a market is interdependent (i.e., that the profitability of a firm’s decisions
regarding pricing depends on competitors’ reactions).”
184
Likewise, in considering the
important “action against self-interest” plus factor, the court wrote that, “[a]n action
that would seem against self-interest in a competitive market may just as well ref lect
market interdependence giving rise to conscious parallelism.”
185
In the court’s view, while
“[m]ore extreme action against self-interest, however, may suggest prior agreement—
for example, where individual action would be so perilous in the absence of advance
agreement,” the plaintiff ’s complaint did not rise to this standard.
186
The court’s analysis
of the remaining alleged plus factors is similar.
187
In summary, it concluded that while the
plaintiffs provided a “context” for their allegations, this context did not “plausibly suggest
[the defendants] entered into illegal horizontal agreements.”
188
Based on its rulings in Kendall, name.space, and In re Musical Instruments, it appears
that the Ninth Circuit requires a plaintiff to plead the “who, what, where, and when”
of the alleged conspiracy and must allege facts that tend to exclude the possibility of
independent action.
189
As the Ninth Circuit noted in its first detailed explication of
Twombly, the Supreme Court “made clear in Twombly that it was concerned that lenient
pleading standards facilitated abusive antitrust litigation.”
190
All indications thus far—in
antitrust and other complex business cases—seem to indicate that the Ninth Circuit has
taken a rigid view of Twombly and elevated the pleading bar for plaintiffs.
191
10. Tenth Circuit
The Tenth Circuit does not appear to have addressed Twombly in the context of
pleading an antitrust conspiracy. In one case, the court quickly affirmed the dismissal of the
plaintiff ’s “conspiracy” claim—(the plaintiff ’s complaint did not even mention Section 1)—
but there is no real analysis of that claim other than noting “there is simply nothing more
183 Id. at *6.
184 Id.
185 Id.
186 Id.
187 See id. at *7-*8.
188 Id. at *8.
189 See also PharmaRX Pharm., Inc. v. GE Healthcare, Inc., 596 F. App’x 580, 581 (9th Cir. 2015) (relying
on Kendall and arming dismissal of the plainti’s antitrust complaint where the plainti failed to
plead “who, did what, to whom (or with whom), where, and when” and where the conduct just as
easily suggested “rational, legal business behavior by the defendants”).
190 Starr v. Baca, 652 F.3d 1202, 1213 (9th Cir. 2011).
191 But see Stetson v. West Pub. Corp., 457 F. App’x 705 (9th Cir. 2011) (reversing dismissal of complaint
where the complaint “sets forth detailed facts about the dealings” between the defendants).
141
than conclusory allegations that a civil conspiracy exists, and this is not enough to satisfy
the requirement of ‘concerted action.’”
192
The Tenth Circuit has, however, given detailed
consideration to Twombly and Iqbal in other contexts. For example, in a § 1983 opinion, the
court suggested that in “complex cases against multiple defendants,” the Twombly standard
“may have greater bite.”
193
Antitrust conspiracy cases, too, are frequently complex and are
against multiple defendants. It remains to be seen whether the Tenth Circuit will import
this apparent sliding-scale analysis to the antitrust domain.
11. Eleventh Circuit
The Eleventh Circuit was confronted with Twombly in a Section 1 case in Jacobs v.
Tempur-Pedic International, Inc.
194
The plaintiffs in Jacobs alleged that Tempur-Pedic engaged
in two restraints of trade: enforcing vertical resale price maintenance agreements and
engaging in horizontal price fixing with its distributors.
195
The district court dismissed the
complaint for failing to state a claim, and the Eleventh Circuit affirmed. After summarizing
Twombly and Iqbal, the court wrote, “after determining whether the complaint’s averments
are more than bare legal conclusions, we examine the complaint for a sufficient quantum
of allegations to plausibly suggest that TPX agreed with its distributors to restrain trade in
violation of the Sherman Act.”
196
The court concluded that Jacobs had failed to set forth
this “sufficient quantum of allegations” for either Section 1 theory. Here, we address only
the discussion of the alleged horizontal price-fixing conspiracy.
197
The plaintiffs alleged that in employing a dual distribution system where it would
sell its mattresses through authorized distributors and its own website, Tempur-Pedic
had engaged in a horizontal price-fixing conspiracy with its distributors.
198
The court
noted that there were two possible inferences to be drawn from this allegation—one that
favored Jacobs and one that favored Tempur-Pedic.
The court adopted the inference that favored Tempur-Pedic. Significantly, it reasoned
that “Jacobs had the burden to present allegations showing why it is more plausible that
[Tempur-Pedic] and its distributors—assuming they are rational actors acting in their
economic self-interest—would enter into an illegal price-fixing agreement (with the
attendant costs of defending against the resulting investigation) to reach the same result
realized by purely rational profit-maximizing behavior.”
199
Stated differently, the Eleventh
Circuit concluded that it was the plaintiff’s obligation to allege facts showing why the
inference favorable to it was more plausible than the inference favorable to the defendants.
192 Native Am. Distrib. v. Seneca-Cayuga Tobacco Co., 546 F.3d 1288, 1298 (10th Cir. 2008).
193 Robbins v. Okla., 519 F.3d 1242, 1249 (10th Cir. 2008); see also Kansas Penn Gaming, LLC v. Collins,
656 F.3d 1210 (10th Cir. 2011) (equal protection case).
194 626 F.3d 1327 (11th Cir. 2010).
195 Id. at 1331.
196 Id. at 1333.
197 This is not to say that the court’s discussion of relevant market, market power, and harm to
competition are not important; rather, they are just not as pertinent to this article, whose focus is
on pleading an agreement or conspiracy.
198 Id. at 1340.
199 Id.
142
In the court’s own words it “juxtaposed” the two inferences and found the complaint
implausible in light of the defendant’s conflicting inference.
200
And the court went further,
holding that even if the inference of tacit collusion was the more plausible inference, Jacobs
would have had to allege that “TPX and its authorized distributors somehow signaled
each other on how and when to maintain or adjust prices”—in other words, how the
conspiracy operated.
201
The court provided the example of an allegation of “dates on which
distributors moved prices together, or the amounts by which the prices moved.”
202
For those
reasons, the court affirmed the dismissal of the horizontal conspiracy.
In sum, under Jacobs, an antitrust plaintiff in the Eleventh Circuit hoping to rely
on circumstantial evidence will likely need to carefully plead facts demonstrating why
the inferences it is asking the reviewing court to make are more plausible than other
conf licting inferences. Additionally, the plaintiff will likely need to include more
detailed factual allegations showing the formation and operation of the conspiracy than
it might in other circuits.
12. D.C. Circuit
The D.C. Circuit just recently first considered Twombly in an antitrust conspiracy
case. While the case—Osborn v. Visa Inc.
203
—does not provide a highly detailed analysis of
Twombly, it provides at least some perspective on pleading a conspiracy in this important
circuit. Previously, the circuit’s most in-depth Twombly analysis appears to have occurred
in Aktieselskabet AF 21, a trademark case.
204
But this case—which preceded Iqbal and held
that Twombly “was concerned with the plausibility of an inference of conspiracy, not with
the plausibility of a claim”—is arguably no longer good law.
205
Osborn involved an alleged conspiracy over the pricing of non-bank ATM access fees.
206
Among other reasons for dismissing the complaint, the district court concluded that the
plaintiffs had failed to allege an agreement in restraint of trade. The D.C. Circuit reversed
the dismissal because it found that the plaintiffs had alleged a horizontal agreement that
“suffices at the pleadings stage.”
207
In particular, the court found allegations that “a group
of retail banks fixed an element of access fee pricing through bankcard association rules”
as the “sort of concerted action necessary to make out a Section 1 claim.”
208
The court
rejected the defendants’ argument that the plaintiffs had pleaded “mere membership” in
an association—finding instead that the plaintiffs had alleged the “member banks used the
200 Id. at 1343.
201 Id.
202 Id.
203 No. 14-7004, 2015 WL 4619874 (D.C. Cir. Aug. 4, 2015).
204 Aktieselskabet AF 21. Nov. 2001 v. Fame Jeans Inc., 525 F.3d 8, 11 (D.C. Cir. 2008).
205 Id. at 17. A subsequent D.C. Circuit case, which does not contain any in-depth analysis of Twombly
or Iqbal suggests that the previous construction of Twombly advanced in Aktieselskabet AF 21 may
now be invalidated. Tooley v. Napolitano, 586 F.3d 1006, 1007 (D.C. Cir. 2009).
206 2015 WL 4619874 at *1.
207 Id. at *7.
208 Id. at *8.
143
bankcard associations to adopt and enforce a supracompetitive pricing regime for ATM
access fees,” which was “enough to satisfy the plausibility standard.
209
Again, although
Osborn does not provide a wealth of guidance, it is at least something for lower courts and
litigants in the D.C. Circuit to consider in pleading and attacking a complaint.
IV. CONCLUDING THOUGHTS
As we believe is evident from the above, the standards for pleading an antitrust
conspiracy under Twombly continue to be refined. With regards to direct evidence, there
does not appear to be any division of authority just yet. But that may be because there
have simply not been enough cases that have considered the issue. The same cannot be
said of cases pleaded on circumstantial evidence. Almost every circuit has given Twombly
detailed consideration, and while they overlap in the main, there are differences at the
margin, particularly those listed below.
First, and most importantly, is the treatment of conduct susceptible to multiple
inferences. The First, Second, and Sixth Circuits have mandated that district courts
are not to weigh inferences on a motion to dismiss. Instead, the only relevant inquiry
is whether the plaintiff ’s allegations create a plausible inference in their own right—
independent of the degree of plausibility or probability of any inferences that the
defendants suggest. By contrast, the Third, Fourth, Sixth (again), Ninth, and Eleventh
Circuits have permitted the weighing of inferences in one manner or another. In other
words, these circuits have permitted district courts to look to whether an inference of
unilateral conduct is more plausible than conspiratorial conduct or whether the plaintiff’s
allegations tend to exclude the possibility of independent conduct. The Supreme Court
has so far rejected petitions for certiorari in many of these cases.
210
Second, some circuits have disagreed on the level of detail required to render a
complaint plausible. On the one hand, the Sixth and Ninth Circuits have held that
a plaintiff must plead the “who, what, where, when, why, and how” of the alleged
conspiracy. Other circuits—such as the First and Second Circuits—do not appear to
require that level of detail. This split likely comes from Twombly itself. While Twombly
states that it was not applying any heightened pleading standard,
211
it also criticized the
plaintiff for failing to mention any “specific time, place, or person involved in the alleged
conspiracies.”
212
Until and unless the Supreme Court grants certiorari on this issue, it may
just be that some circuits require more specific facts in a pleading than others.
Finally, a split has begun to emerge concerning whether a plaintiff must allege “plus-
factor” evidence in a complaint. There is a sharp division here between the First and
the Third Circuits. The former concluded that while allegations of plus-factor evidence
may enhance the plausibility of a conspiracy, they are not necessary. On the other hand,
209 Id.
210 E.g., Curtis Circulation Co. v. Anderson News, L.L.C., 133 S. Ct. 846 (2013) (denying certiorari); Loren
Data Corp. v. GXS, Inc., 133 S. Ct. 2835 (2013) (denying certiorari); Tam Travel, Inc. v. Am. Airlines, 131
S. Ct. 896 (2011) (denying certiorari); Cellco P’Ship v. Morris, 131 S. Ct. 2165 (2011) (denying certiorari).
211 Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 569 n.14 (2007).
212 Id. at 565 n.10.
144
the Third Circuit requires that plaintiffs allege at least one plus factor that will support a
finding of conspiracy. As the other circuits begin to weigh in on the issue, this may be
something that will eventually catch the attention of the Supreme Court.
In summary, what a plaintiff must allege to plead a “plausible” antitrust conspiracy remains
in flux. The issue will undoubtedly continue to arise, and the divisions between the circuits may
very well deepen. If that is the case, the Supreme Court may have cause to revisit the issue again
and clarify what exactly is needed to plead an agreement under the Sherman Act.
