10-4591-cv Anderson News, L.L.C. v. American Media, Inc.
UNITED STATES COURT OF APPEALS 1
FOR THE SECOND CIRCUIT 2

- - - - - - 3 August Term, 2011 4 (Argued: October 19, 2011 Decided: April 3, 2012) 5 Docket No. 10-4591-cv 6

_________________________________________________________ 7 ANDERSON NEWS, L.L.C., LLOYD T. WHITAKER, as the Assignee under an 8 Assignment for the Benefit of Creditors for Anderson Services, L.L.C., 9 Plaintiffs-Appellants , 10

- v. - 11 AMERICAN MEDIA, INC., BAUER PUBLISHING CO., LP., CURTIS 12 CIRCULATION COMPANY, DISTRIBUTION SERVICES, INC., HACHETTE 13 FILIPACCHI MEDIA, U.S., HUDSON NEWS DISTRIBUTORS LLC, KABLE 14 DISTRIBUTION SERVICES, INC., RODALE, INC., TIME INC., 15 TIME/WARNER RETAIL SALES & MARKETING, INC., 16 Defendants-Appellees , 17 THE NEWS GROUP, LP, 18 Defendant

. 19

_________________________________________________________ 20 Before: KEARSE, LEVAL, and CHIN, Circuit Judges

. 21 Appeal from a judgment of the United States District Court for the Southern District 22 of New York, Paul A. Crotty, Judge , granting defendants' motion to dismiss for failure to state a claim 23 under § 1 of the Sherman Act, 15 U.S.C. § 1, and de nying leave to file an amended complaint. See 24 732 F.Supp.2d 389 (2010). 25 Vacated and Remanded. 262 MICHAEL K. KELLOGG, Washington D.C. (Aaron M. Panner, 1 Kellogg, Huber, Hansen, Todd, Evans & Figel, Washington D.C., 2 Marc Rowin, Thomas P. Lynch, Lynch, Rowin, New York, New York, 3 Marc E. Kasowitz, Kasowitz, Be nson, Torres & Friedman, New York, 4 New York, on the brief), for Plaintiffs-Appellants

. 5 DAVID G. KEYKO, New York, New York (Pillsbury Winthrop Shaw 6 Pittman, New York, New York, on the brief), for Defendants7 Appellees American Media, Inc., and Distribution Services, Inc. 8 BARRY J. BRETT, New York, New York (Daniel N. Anziska, 9 Troutman Sanders, New York, New Yo rk, on the brief), for Defendant10 Appellee Bauer Publishing Co., LP. 11 DECHERT, New York, New York (George G. Gordon, Joseph F. 12 Donley, New York, New York, of counsel), submitted a brief for 13 Defendant-Appellee Curtis Circulation Company

. 14 JONES DAY, New York, New York (M eir Feder, D. Theodore Rave, 15 of counsel), submitted a brief for Defendant-Appellee Hachette 16 Filipacchi Media U.S., Inc. 17 GIBSON DUNN & CRUTCHER, Washi ngton, D.C. (D. Jarrett Arp, 18 Cynthia E. Richman, of counsel), submitted a brief for Defendant19 Appellee Hudson News Distributors L.L.C. 20 MCELROY, DEUTSCH, MULVANEY & CARPENTER, New York, 21 New York (I. Michael Bayda, Jay A. Katz, of counsel), submitted a 22 brief for Defendant-Appellee Kable Distribution Services, Inc. 23 WINSTON & STRAWN, New York, New York (John M. Hadlock, of 24 counsel), submitted a brief for Defendant-Appellee Rodale, Inc. 25 ROWAN D. WILSON, New York, New York (Thomas G. Rafferty, 26 Margaret E. Lynaugh, Cravath, Sw aine & Moore, New York, New 27 York, on the brief), for Defendants-Appellees Time Inc. and 28 Time/Warner Retail Sales & Marketing, Inc. 293 KEARSE, Circuit Judge : 1 Plaintiffs Anderson News, L. L.C., and Lloyd T. Whitaker, as assignee for the benefit 2 of creditors for Anderson Services, L.L.C. (coll ectively "Anderson"), appeal (1) from a judgment of 3 the United States District Court for the SouthernDistrict of New York, Paul A. Crotty, Judge , 4 dismissing their complaint alleging that defendants-appellees, who were suppliers and business 5 competitors of Anderson, conspired to drive Anders on out of business, in violation of § 1 of the 6 Sherman Antitrust Act, 15 U.S.C. § 1, and New York law, and (2) from an order denying Anderson's 7 motion for reconsideration and for leave to file a proposed amended complaint. The district court 8 granted the motions of defendants-appellees ("defendants") to dismiss the complaint under Fed. R. 9 Civ. P. 12(b)(6) for failure to state a claim on which relief can be gr anted, and denied reconsideration, 10 ruling that the alleged conspiracy was facially implausible under the standards set by Bell Atlantic 11 Corp. v. Twombly , 550 U.S. 544 (2007) ("Twombly "), and Ashcroft v. Iqbal , 129 S. Ct. 1937 (2009) 12 ("Iqbal "); the court denied Anderson's request for permission to file an amended complaint, ruling that 13 the defects in the original complaint were incura ble and that the proposed new complaint added only 14 allegations that were conclusory. On appeal, Anderson contends principally that its complaint 15 contained sufficient factual allegations to plead an antitrust violation under the standards set by 16 Twomblyand Iqbal , and that it should have been allowed to file its proposed amended complaint 17 which contained additional factual allegations. We c onclude that even if the original complaint did 18 not meet the Twombly/Iqbalstandard, Anderson's proposed amended complaint, which contains 19 additional factual allegations, meets that standard and should have been allowed. Accordingly, we 20 vacate the judgment of dismissal and remand for further proceedings. 214 I. BACKGROUND 1 The present action involves the si ngle-copy magazine industry, i.e. , the business of 2 selling magazines for purchase by consumers at retail outlets such as newsstands, bookstores, and 3 mass merchandise retailers, as contrasted with the subscription-sales industry which involves shipping 4 magazines directly to consumers. The following de scription of the single-copy magazine industry (or 5 "magazine industry") and the events leading to this litigation is taken principally from Anderson's 6 original complaint ("Complaint") and/or from its proposed amended complaint (or "PAC"), taking as 7 true all material factual "allegations of the . . . complaint and proposed . . . amended complaint," and 8 "draw[ing] all reasonable inferences and resolv[ing] all conflicts and ambiguities in favor of 9 plaintiffs," Papelino v. Albany Collegeof Pharmacy of Union University , 633 F.3d 81, 85 n.1 (2d Cir. 10 2011). 11

A. The Parties 12 Anderson, whose creditors forced it into bankruptcy liquidation proceedings in March 13 2009, had been a wholesaler in the magazine indus try since 1917. Wholesalers are responsible for, 14 inter alia , the delivery of magazines to retailers. As a wholesaler, Anderson purchased magazines 15 from their respective publishers at prices in the range of 50-60 percent of the cover prices and resold 16 the magazines to retailers at 70-80 percent of the cover prices. (SeeComplaint ¶ 30; PAC ¶ 33.) Prior 17 to February 2009, Anderson had become the second larg est magazine wholesaler in the United States, 18 with a 27-percent market share, servicing 30,000 retail customer locations in 37 states. (See 19 Complaint ¶¶ 19, 30; PAC ¶¶ 22, 37.) 20 The 10 defendants are, principally, national magazine publishers and their distribution 21 representatives. The five magazine publisher defendants are: 225 American Media, Inc. ("AMI"), the fourth largest publisher of consumer magazines, including 1 six of the 15 best-selling weekly newsstand magazines; 2 Bauer Publishing Co. ("Bauer"), the largest publisher of newsstand magazines; 3 Hachette Filipacchi Media, U.S. (" Hachette"), publisher of, inter alia , HOME , Car and 4 Driver , Road and Track , Popular Photography , Woman's Day , and ELLE ; 5 Rodale, Inc. ("Rodale"), publisher of, inter alia , Prevention , Men's Health , Women's 6 Health , and Runner's World ; and 7 Time, Inc. ("Time"), the largest publisher of magazines overall in the United States, 8 publishing more than 120 magazines including Time , People , Sports 9 Illustrated , Golf, Fortune , and Money

. 10 Approximately 80 percent of the magazines distributed by Anderson were published by the defendant 11 publishers. (See , e.g. , Complaint ¶ 64; PAC ¶ 84.) 12 The so-called "distributor[]" defendants are companies that "perform no physical 13 distribution activities like warehousing, order assembly, delivery or in-store merchandising" (PAC 14 ¶ 16) but rather are retained by publishers to, inter alia , broker and manage the publishers' 15 relationships with wholesalers (see , e.g. , Complaint ¶ 13; PAC ¶ 16). Th e four distributor defendants 16

are: 17 Distribution Services, Inc. ("DSI"), a s ubsidiary of AMI that provides marketing 18 services to publishers, including AMI, Bauer, Hachette, and Rodale; 19 Curtis Circulation Co. ("Curtis"), an affiliate of Hachette; the largest national 20 magazine distributor in the United States by volume, representing at least 400 21 publishers, including Hachette, Rodale, and AMI, with respect to hundreds of 22 national titles; 23 Kable Distribution Services, Inc. ("Kable"), the second largest national distributor in 24 the United States, representing more than 250 publishers, including Bauer, 25 with respect to more than 650 magazines, annuals, and digests; and 26 Time/Warner Retail Sales & Marketing, Inc. ("TWR"), a national magazine distributor 27 whose clients include Time, its corporate parent. 286 Curtis, Kable, and TWR, along with non-party Co mag Marketing Group LLC ("Comag"), are the four 1 national distributors in the United States. 2 The remaining defendant, Hudson News Distributors LLC ("Hudson"), is a major 3 wholesaler. In 2008, four wholes alers accounted for 90 percent of single-copy magazine distribution: 4 Hudson, with a market share of 11 percent; The News Group, LP ("News Group"), with 21 percent; 5 Anderson with 27 percent; and Source Interlink Distribution, L.L.C. ("Source"), with 31 percent. (See 6 Complaint ¶ 30; PAC ¶ 37.) News Group was origin ally named a defendant in this action but was 7 shortly dismissed as part of a settlement. (SeePAC ¶ 25.) The Complaint alleged that Source, like 8 Anderson, was a target of defendants' alleged cons piracy, which aimed to eliminate the two largest 9 magazine wholesalers; Source, however, obtained a restraining order, and after "defendants produced 10 documents in discovery, they agreed to enter into settlements with Source for the multi-year supply 11 of magazines." (PAC ¶ 26.) 12

B. The Single-Copy Magazine Sales Industry 13 Magazine wholesalers are responsible not only for delivering the magazines to retailers 14 but also for thereafter picking up from the retailers , tabulating, and destroying any copies that remain 15 unsold. (See , e.g. , Complaint ¶¶ 29-30; PAC ¶ 33.) However, publishers have an incentive to see that 16 each retailer is overstocked, in order to ensure maximum sales and thereby maximize advertising 17 revenues (see , e.g. , Complaint ¶ 31; PAC ¶¶ 34, 41) ; "[i]ndeed, nearly half of all newsstand magazine 18 titles have a 'sell-through' percentage as low as 80%--meaning that, of five magazines distributed by 19 the wholesaler, only one is actually sold to a cons umer" (PAC ¶ 41). The co st of such overstocking 20 is borne not by the publishers that desire it, however, but rather by the wholesalers, for wholesalers 21 historically have been compensated only for the copies that retailers actually sold. (See , e.g. , id .) 227 Thus, when only one of five copies distributed is sold to a consumer, the wh olesaler must bear the 1 expense of retrieving the four unsold copies and tr ansporting them back to its facilities for disposal 2 or destruction, while being paid for only the one sold copy. 3 Accordingly, Anderson and Source had advocated adoption of a different system, 4 under which the retailers would automatically report their sales to the publishers through use of 5 electronic checkout scanners, dubbed "scan-based trading," and the retailers themselves would destroy 6 all magazines they had not sold. Wholesalers would thereby be spared the unreimbursed cost of 7 picking up, counting, reporting, and destroying unsold copies. (See , e.g. , Complaint ¶¶ 32-33; PAC 8 ¶ 42.) Publishers, however, opposed scan-based trading, citing fears of mistaken underreporting of 9 sales due to machine error (estimated to be some five percent of all sales); underreporting would 10 negatively affect the publishers' revenues from both sales and advertising. (See , e.g. , Complaint ¶ 34; 11 PAC ¶ 43.) 12 In early January 2009, Anderson decided that it would announce the imposition on 13 publishers, as of February 1, 2009, of a $.07 distribution surcharge (the "Surcharge") for each 14 magazine copy Anderson received and distributed, re gardless of whether the retailer sold the copy. 15 (SeeComplaint ¶ 39; PAC ¶ 49.) Some paragraphs of Anderson's Complaint and proposed amended 16 complaint allege that the Surcharge was "a tem porary, stop-gap measure" (Complaint ¶ 39; PAC ¶ 49) 17 and characterize it as a "proposed. . . surcharge" (e.g. , Complaint ¶ 40 (emphasis added); PAC ¶ 50 18 (emphasis added)); and the proposed amended complaint asserts that the Surcharge was "not . . . non19 negotiable" (PAC ¶ 51; see alsoid . ¶ 4 ("As defendants well know, th e proposed surcharge itself was 20 negotiable.")). However, other paragraphs of th e Complaint (unlike the PAC) cast the Surcharge in 21 a more intractable light. For example, the Complaint alleged that on January 12 and 13 Charles 22 Anderson, Anderson's chief executive officer ("CEO"), met with some of its largest publisher clients, 238 including Time, AMI, and Bauer, and "informed the publishers of Anderson's decision to imposethe 1 $.07 per copy surcharge." (Complaint ¶ 41 (emphasis added); compareid . withPAC ¶ 51 2 (substituting "proposed temporary stop-gap meas ure" for "decision to impose the $.07 per copy 3 surcharge").) And the Complaint alleged that on "January 14, 2009, Mr. Anderson had a call-in 4 interview with the representative of an industry publication, The New Single Copy , during which he 5 publicly announced the surcharge and explai ned the industry constraints compellingthat measure." 6 (Complaint ¶ 42 (emphasis added); compareid . withPAC ¶ 52 (substituting "underlying" for 7 "compelling").) 8

C. The Alleged Conspiracy 9 Anderson alleged that shortly after the mid-January announcement of its $.07 10 Surcharge, Source announced that Source too would impose a $.07-per-distributed-copy surcharge 11 on publishers (seeComplaint ¶ 50; PAC ¶ 54), and that defendants decided to attempt to eliminate 12 Anderson or Source, or both, as wholesalers. It alle ged that on at least two occasions in late January, 13 defendants invited Anderson to join their effort to eliminate Source. Thus, Michael Duloc, Kable's 14 president and CEO, in a telephone call with Frank Stockard, Anderson's president, discussed offering 15 Anderson exclusivity in certain geographic territories in exchange for Anderson's dropping its 16 proposed Surcharge; and Robert Castardi, Curtis's president, told Charles Anderson, "in words or 17 substance," that "[o]nce Source was excluded from the market and its business destroyed, . . . 18 Anderson could use its regional market power to 'get all your [Anderson's] profits from the retailers,'" 19 but, Castardi said, "'you need to let Source go out first,'" (Complaint ¶ 50; PAC ¶ 58). Anderson 20 declined the invitations to join in the elimination of Source. 219 Anderson alleged that Curtis (on behalf of Hachette, Rodale, and AMI) and Kable (on 1 behalf of Bauer), refused to enter into any leg itimate substantive negotiations with Anderson. (See 2 PAC ¶ 66.) It alleged that Comag negotiated for a modified arrangement. And it alleged that TWR, 3 with respect to Time's magazines, met with Anderson to discuss alternatives to the Surcharge and 4 purported to agree to adjustments in the allocation of magazine distribution expense, asking Anderson 5 to make immediate payments on its accounts with them (seeComplaint ¶¶ 52-53; PAC ¶ 65), but that 6 "Time and TWR never had any intention of honoring their commitment to continue to work with 7 Anderson" (PAC ¶ 69; seeComplaint ¶ 55). Anderson alleged that in late January 2009, defendants 8 met or communicated with each other--in various combinations (see , e.g. , PAC ¶¶ 56, 57, 59, 60, 61, 9 62, 63, 66)--and agreed that each of them would reject Anderson's proposed Surcharge, would refuse 10 any other accommodation, and would stop supplying Anderson with magazines. 11 Defendants understood that joint action was ne eded because in 2008 Curtis, the leading 12 national magazine distributor, representing publishers of some of the most popular magazines, had 13 tried to eliminate Anderson unilaterally and had faile d. In that attempt, Curtis informed Wal-Mart, 14 one of Anderson's major retail clients, that Curtis's publisher clients would no longer supply 15 magazines to Anderson; Wal-Mart, preferring to use a single wholesaler to supply a given store, 16 responded that it would continue to purchase mag azines only from Anderson even if that meant not 17 carrying the magazines of Curtis's publishers; and Curtis thus reversed course and resumed supplying 18 Anderson. (SeeComplaint ¶ 45; PAC ¶ 46.) "Curtis's faile d unilateral attempt to eliminate Anderson 19 as a wholesaler confirmed to Curtis that concerted action among the major publishers and national 20 distributors was essential to achieve" the eliminati on of Anderson and to force retailers to deal with 21 wholesalers chosen by the publishers. (PAC ¶ 46; seeComplaint ¶ 45.) Accordingly, the Complaint 22 alleged, 2310 throughout the latter part of January [2009] and the early days of February, 1 defendants--ostensibly each others' competitors--held numerous meetings 2 during which they discussed dividing the U.S. distribution territory into two 3 regions--one controlled by Hudson and the other controlled by News Group. 4 For example, in furtherance of their c onspiracy to cut off supply to Anderson 5 and Source, defendants Curtis and Hudson met with their respective 6 competitors, TWR and News Group, in January 2009 at Hudson's offices in 7 North Bergen, New Jersey. 8 56. Moreover, [TWR's CEO Rich] Jacobsen made clear in a 9 conversation with Source's CEO, Greg Mays, at a February 2 dinner meeting 10 in New York, why Source and Anderson were being terminated. When 11 Jacobsen told Mays that TWR would not be supplying any magazines to 12 Source, Mays asserted to Jacobsen that with the distribution system being 13 created by defendants, there would be no scan-based trading, the two 14 remaining wholesalers would force re duced margins down to the retailers 15 rather than to the publishers, and there would be absolute control over the 16 market. Jacobsen's response, in words or substance, was: "Exactly--we now 17 control this space." 18 (Complaint ¶¶ 55-56; seePAC ¶¶ 63, 81.) The Complaint alleged that 19 in late January, national distributor defendants Curtis, Kable, and TWR, and 20 publisher defendants AMI, Bauer, Hachette, Rodale, and Time--acting in 21 concert--cut off Anderson from its s upply of magazines--including the most 22 popular titles, like Peopleand Sports Illustrated

. 23 (Complaint ¶ 47; see , e.g. , PAC ¶¶ 66-67.) 24 Anderson, deprived of 80 percent of the magazines it normally distributed, was forced 25 to suspend its magazine wholesale business on February 7, 2009. (SeeComplaint ¶¶ 64-66; PAC 26 ¶¶ 84-86.) On March 2, 2009, creditors of Anderson forced the company into bankruptcy liquidation 27 proceedings. 28 Anderson alleged that "[d]efendants' conduct has reduced the output of magazines 29 through the wholesale market." (Complaint ¶ 73; PAC ¶ 93.) It allege d that that conduct has 30 "permanently reduced the choices available to retailers and their customers" (Complaint ¶ 74; PAC 31 ¶ 94) and that in some areas "wholesale distributors were temporarily unavailable to serve retailers" 32 (PAC ¶ 93), so that "for a significant period of time the retailers' customers had access to fewer 3311 magazines as well" (id .). Further, the elimination of Anderson as a wholesaler allowed News Group 1 and Hudson to increase the prices charged to appr oximately 80 percent of the retailers that had 2 previously purchased magazines from Anderson. (SeePAC ¶¶ 82, 95.) 3 Anderson commenced the present action on March 10, alleging principally that 4 defendants' agreement to boycott Anderson violated § 1 of the Sherman Act, 15 U.S.C. § 1; it also 5 alleged tortious interference with business relations and civil conspiracy in violation of state law. 6 Those originally sued included News Group, whic h, two days after the Complaint was filed, was 7 voluntarily dismissed in accordance with a release executed by Anderson, which had been forced to 8 sell certain distribution assets to News Group in February 2009. The remaining defendants eventually 9 moved pursuant to Fed. R. Civ. P. 12(b)(6) to dismiss the Complaint for failure to state a claim on 10 which relief can be granted; they argued, relying principally on Twombly , that the Complaint did not 11 set forth a plausible basis for finding a conspiracyin violation of the antitrust laws. Anderson 12 opposed the motions, contending that the Complaint met the Twombly/Iqbalstandard but requesting 13 permission to file an amended complaint if the court disagreed. 14

D. The Dismissal of the Complaint 15 In an opinion dated August 2, 2010, reporte d at 732 F.Supp.2d 389, the district court 16 granted defendants' motions to dismiss the Complaint, seeid . at 396-406. Citing the Supreme Court's 17 decision in Twombly , the court noted that 18 [a] complaint alleging an antitrust claim must set forth sufficient facts to raise 19 a plausible suggestion that the purported parallel conduct stemmed from an 20 agreement. . . . Thus allegations of parallel conduct coupled with bare 21 assertions of conspiracy are not sufficient to state a claim; rather, parallel 22 conduct allegations must be placed in a context that raises a suggestion of a 23 preceding agreement . . . . Examples of parallel conduct allegations that would 24 suffice under this standard include "par allel behavior that would probably not 25 result from chance, coincidence, independent responses to common stimuli, or 2612 mere interdependence unaided by an advance understanding among the 1 parties." 2 732 F.Supp.2d at 396 (quoting Twombly , 550 U.S. at 556 & n.4 (emphasis ours)). The court noted 3 that 4 [a]ntitrust allegations need not be detailed with overt acts by each 5 defendant, but must plausibly state howeach defendant was involved in the 6 alleged conspiracy. . . . Allegations connecting defendants to the conspiracy 7 must be viewed in light of the complaint as a whole

. 8 732 F.Supp.2d at 396 (internal quotation marks omitted) (emphasis added). 9 The court concluded that Anderson's antitrust allegations did not meet Twombly 's 10 plausibility standard. 11 The Complaint alleges that Defendants engaged in a broad industry-wide 12 conspiracy. The ultimate goal of this alleged conspiracy was to eliminate both 13 Anderson and non-party Source, two of th e four largest magazine wholesalers 14 . . . . This goal is not plausible. Publishers and national distributors have an 15 economic self-interest in more wholesaler s, not fewer; more wholesalers yields 16 greater competition, which is good for suppliers . Destroying Anderson and 17 Source would reduce the publisher's wholes ale outlets from four to two and 18 would give Hudson and News Group , the two remaining major wholesalers, 19 90% of the market share . . . . This is too much market power to yield to 20 wholesalers . Indeed, the Complaint alleges that Anderson's demise has 21 substantially reduced the output of magazines as well as the ability of retailers 22 to obtain magazines . . . . It is implausible that magazine publishers would 23 conspire to deny retailers access to th eir own products. Collusion to destroy 24 Anderson and non-party Source--the ultimate goal of the alleged conspiracy--is 25 facially implausible. 26 732 F.Supp.2d at 396-97 (emphases added). Citing, inter alia , a transcript of Charles Anderson's 27 interview with The New Single Copy 's representative ("Interview Tr."), the court noted that 28 [t]he Defendants[] had different reactions to Anderson's unilateral 29 Surcharge. That diversity compounds the implausibility of Anderson's 30 antitrust claim. Anderson predicates its antitrust claim on a theory of 31 conscious parallel conduct , i.e., a pattern of uniform business conduct. The 32 Complaint's core parallel conduct allegation is that Defendants cut off 80% of 33 Anderson's magazine supply . . . . The Defendants, however, reacted 34 differently to Anderson's Surcharge: AMI, like non-party C[omag], continued 35 to supply magazines to Anderson and thus could not have participated in the 3613 parallel conduct; Bauer and Time held a cordial meeting with Anderson and 1 responded amicably to the Surcharge . . . ; TWR agreed to a 2% discount off 2 the cover price of all Timeweeklies or a 2.75% discount off the cover price for 3 all Peopleweeklies ([Interview Tr. at 2]); . . . Kable offered Anderson 4 exclusivity in certain territories if Anderson dropped the Surcharge . . . ; and 5 Curtis informed Mr. Anderson that he "would like to get this worked out," but 6 that he would "have to go with whatever Rich [Jacobsen, CEO of Defendant 7 TWR] does" . . . . Conspirators hatching a concerted scheme to destroy 8 Anderson would not have reacted so differently to the Surcharge . The 9 dramatic differences among the Defendants' reactions undermine Anderson's 10 theory of conscious parallel conduct. 11 732 F.Supp.2d at 397 (footnote omitted) (emphases added). 12 The court further found that the Complaint did not provide a context lending itself to 13 an inference of collusion: 14 Even if the Complaint plausibly alleges conscious parallel conduct, 15 however, the Court would still grant Defe ndants' motion to dismiss because the 16 Complaint fails to place the parallel c onduct in a context plausibly suggesting 17 collusion. The Complaint does not contai n allegations of direct evidence of 18 a conspiracy; there are, for example, no allegations of statements by an insider 19 informant , nor are there allegations of records disclosed through a government 20 investigation.FN9 21 FN9. Rather, Anderson relies on several vague 22 statements by executives of some of the Defendants[] regarding 23 collusion(Comp. ¶¶ 49, 50, 52, 54, 56.) These statements are 24 insufficient. See below the discussion of the sufficiency of the 25 antitrust allegations as to the Defendants individually

. 26 Anderson also relies heavily on paragraph 55 of the Complaint, 27 which alleges that "throughout the latter part of January and the 28 early days of February" (i.e., the entire duration of the alleged 29 conspiracy) certain unnamed defendants held "numerous 30 meetings" in unspecified places ; that (at some indeterminate 31 date ) Curtis, TWR, News Group, and Hudson, met at Hudson's 32 New Jersey offices; and that during these alleged meetings, 33 Defendants discussed dividing the U.S. distribution territory 34 into two regions, one controlled by Defendant Hudson and the 35 other by non-party News Group. Li ke the vague statements of 36 some of the Defendants' executives, these allegations are also 37 insufficient to plausibly suggest a prior agreement among 38 Defendants. 39

. . . . 4014 The context here is that until January 14, 2010 there is no allegation of 1 conspiracy. On that date, Anderson initiated a $.07 Surcharge on a take it or 2 leave it basis. The demand was presented by a widely circulated trade 3 magazine. Anderson's demand required a response. While the responses 4 varied, ultimately the magazine publishers decided not to acquiesce to 5 Anderson's demand. In this context, the Defendants' decision to stop doing 6 business with Anderson--the key parallel conduct allegation--does not create 7 an inference of collusion; rather, it is "i n line with a wide swath of rational and 8 competitive business strategy unilaterally prompted by common perceptions 9 of the market ." Twombly , 550 U.S. at 556, 127 S.Ct. 1955. 10 The context of the alleged parallel conduct is Anderson's unilateral 11 Surcharge. The Surcharge drove Defe ndants' interactions with Anderson, as 12 Anderson initially desired. Anderson publicly announced the Surcharge on 13 January 14, 2009, and the claimed conspiracy began almost immediately 14 thereafter, unfolding rapidly and driving Anderson out of business within 15 weeks (¶¶ 42, 47, 66.) The Complaint recognizes the centrality of the 16 Surcharge by highlighting it in several paragraphs (¶¶ 39-44) and presenting 17 it as the backdrop to Defendants' alleged conspiracy: "[D]efendants saw 18 Anderson's proposed fee as nothing short of an opportunity to eliminate 19 Anderson as a wholesaler" (Comp. ¶ 44.) 20 But that characterization does not describe what happened. The 21 Defendants were not acting in a vacuum; they were reacting to Anderson's 22 Surcharge, an added fee on all single-copy magazines . Anderson presented the 23 Surcharge as an ultimatum: the Defendants would either have to accept the 24 Surcharge in writing or lose Anderson's services ([Interview Tr.] at 4, 10.) 25 Definitive in his presentation of the Surcharge, Mr. Anderson recognized that 26 the publishers would "be making decisions as to what they needed to do" 27 ([Interview Tr.] at 5.) The magazine publishers did not acquiesce to 28 Anderson's demands and accordingly Anderson's services were no longer 29 available. Clearly the Defendants made a business decision --and one that each 30 of the Defendants had to, and did, make quickly because of Anderson's 31 demand. While the decision resulted inAnderson losing 80% of its supply of 32 magazines, this was unchoreographedbehavior , a common response to a 33 common stimulus. . . . The Defendants responded to Anderson's unilateral 34 demand, a negative stimulus, by pursuing similar but predictable policies to 35 protect their business interests. Unilateral parallel conduct is completely 36 plausible in this context . The parallel conduct itself does not create an 37 inference of collusion to destroy Anders on; and the Complaint's allegations are 38 insufficient to show that the parallel conduct was collusive. 39 732 F.Supp.2d at 397-99 & n.9 (emphases ours); seeid . at 401 ("Anderson created a common 40 economic stimulus, impelling an immediate market reaction. . . . Publisher[s] and distributors each 4115 decided that, rather than accept the Surcharge, they would not do busine ss with Anderson. Having 1 proposed its pay-it-or else Surcharg e, Anderson can not claim collusionin the Defendants' refusal to 2 acquiesce to its self-destructive demand." (emphases added)). 3 The court noted Anderson's allegations that Curtis in 2008 had attempted to cut 4 Anderson off unilaterally but had failed, and that that failure had taught the defendants that joint 5 action was needed to boycott a major wholesaler successfully; but the court characterized those 6 allegations as legal arguments that it found unpersuasive. 7 [I]t is plausible that each of the publisher Defendants unilaterallystopped 8 shipping magazines to Anderson rather th an pay the Surcharge. Without that 9 Surcharge, Anderson said it would not offer its distribution services. In these 10 circumstances, Defendants conducted a cost/benefit analysis of the financial 11 impact of payment of Anderson's Surc harge, as opposed to the business lost 12 if their competitor publishers did not also stop shipping magazines to 13 Anderson. Having concluded that their business interests favored rejecting 14 Anderson's ultimatum, the magazine publishers stopped shipping magazines 15 to Anderson, betting that their competito rs would follow suit. And if that 16 expectation was ill-founded, then the l eading publisher could resume business 17 relations with Anderson, just as Curtis did in 2008. 18 Id . at 400 (emphasis added). The court stated that 19 [a]ccepting all non-conclusory allegations as true, Anderson alleges only that 20 Curtis, TWR, News Group, and Hudson, met at Hudson's New Jersey offices 21 to discuss dividing the U.S. distribution territory into two regions, one 22 controlled by Hudson and the other by News Group . . . ; that Curtis, Kable, 23 and TWR, Bauer, Hachette, Rodale, and Time cut off 80% of Anderson's 24 magazine supply . . . ; that Hudson poached several of its employees during the 25 alleged conspiracy . . . ; that Anderson was forced to lay off thousands of 26 employees and sell its distribution-related assets to News Group at fire-sale 27 prices . . . ; and that News Group has also succeeded in taking over Anderson's 28 retail distribution business . . . . 29 732 F.Supp.2d at 402. The court concluded that th ese allegations presented only "an economically 30 implausible antitrust conspiracy" theory "based on sparse parallel conduct allegations" that lacked "a 31 context suggesting a preceding agreement." 732 F.S upp.2d at 402. The court stated that "[w]hile a 32 court takes all factual allegations as true on a motion to dismiss, . . . factual inferences are not entitled 33 to the same benefit ." Id . (emphasis added). 3416 The district court also found that the Complaint lacked sufficient factual allegations 1 to permit an inference of culpabilityon the part of any given defendant. As to Curtis, the court found 2 that the statements attributed to CEO Robert Castardi were "not inculpatory"; his statement that he 3

was 4 "going to have to go with whatever Rich [Jacobsen, CEO of TWR] does" 5 . . . suggests onlythat he would wait to see what TWR did and that, in fact, he 6 had no actual knowledge of Jacobsen's plans regarding Anderson. . . . 7 Similarly, Castardi's statement to Mr . Anderson, "[Y]ou need to let Source go 8 out first" . . . is not, as Anderson argues, an invitation to join a massive 9 antitrust conspiracy

. 10 732 F.Supp.2d at 402 (emphases added). 11 As to TWR, the court noted that the allegati ons of its attendance at the meeting in the 12 Hudson offices and of the statements by TWR's CEO Jacobsen were "insufficient to plausibly allege 13 a conspiratorial agreement," and that when Jacobsen on February 2 explained the elimination of 14 Anderson and Source by saying, "'we now control this space'" he was merely "describing the state of 15 the magazine industry." 732 F.Supp.2d at 402. The court found that the allegation that "when Mr. 16 Anderson first told Jacobsen of Castardi's statements indicating that Curtis would follow TWR, 17 Jacobsen indicated he realized Anderson knew there had been collusion" merely asked that 18 "conspiracy [be] inferred from silence." Id . (internal quotation marks omitted) 19 As to Kable, the court found that, other than alleging that Kable cut off Anderson's 20 magazine supply, the Complaint alleged only that Kable's President and CEO Michael Duloc offered 21 Anderson exclusive distribution rights in certain territories if Anderson would drop the Surcharge. 22 "Duloc[]'s offer does not suggest a preceding agreement; it indicates onlya unilateral offer of 23 exclusive distributorship." Id . at 403 (emphasis added). 2417 As to DSI, the court found that the Complaint "does not allege that DSI engaged in any 1 conspiratorial conduct; it alleges only that DSI is a subsidiary of AMI and a provider of sales and 2 marketing services to publishers." Id

. 3 The court found that the Complaint fared no better with respect to any of the publisher 4 defendants. As to AMI, the court found that A nderson was collaterally estopped from asserting that 5 AMI participated in the boycott of Anderson: 6 The Court . . . takes judicial notice of an Order issued in a proceeding in 7 Delaware Chancery Court finding that AMI continued to ship magazines to 8 Anderson in February 2009, after the alleged boycott occurred . . . . Anderson 9 and AMI were parties to the Delaware proceeding, triggering the doctrine of 10 collateral estoppel. . . . Therefore, the Court rejects Anderson's antitrust 11 allegations as to AMI. 12 Id . (emphasis added). As to the other four publisher defendants, the court stated that 13 [t]he Complaint lacks specific allegations as to the publisher 14 Defendants (Time; Bauer; Hachette; and R odale) other than to allege that they 15 collectively cut off Anderson from its magazine supply . . . . Anderson 16 attempts to implicate the publisher Defendants in the conspiracy through their 17 relationship with the national distributor Defendants . . . . The Complaint's 18 allegation of an agency relationship , however, is conclusory . Moreover, an 19 agency relationship with the national distributor Defendants is insufficient 20 where, as here, the Complaint fails as to the national distributor Defendants

. 21 Id . (emphases added). 22 Finally, as to Hudson, the district court noted that although Anderson initially alleged 23 that Hudson took over Anderson's distribution business, Anderson had, by letter to the court, 24 withdrawn that assertion. The court reas oned that as Hudson was a wholesaler, i.e. , an Anderson 25 competitor rather than supplier, Hudson could not e ngage in conduct that "parallel[ed]" that of the 26 publishers or distributors, and thus, there was "no conceivable" ba sis for a claim by Anderson against 27 Hudson: 2818 The Complaint fails to allege parallel conduct as to Hudson. As the 1 only magazine wholesaler Defendant, Hudson is uniquely situated. The 2 Complaint does not allege that Hudson cut off Anderson's magazine supply; 3 indeed, as a wholesaler, Hudson could not cut off Anderson's magazine supply

. 4 The Complaint alleges only that Hudson poached several of Anderson's 5 employees during the alleged conspiracy . . . , and that Hudson took over 6 Anderson's retail distribution business . . . . In a letter to the Court dated June 7 9, 2010, however, Anderson withdrew its allegation that Hudson has taken 8 over Anderson's retail distribution business . . . . There is thus no conceivable 9 role for Hudson in the alleged conspiracy . The single remaining allegation-- 10 that Hudson poached several of Anders on's employees--is plainly insufficient 11 to plausibly allege an antitrust claim as to Hudson. 12 732 F.Supp.2d at 403 (emphases added). 13 Having found that the Complaint provided no plausible basis for a Sherman Act claim 14 against any defendant, the court also dismissed Anderson's state-law claims for tortious interference 15 with business relations and civil conspiracy, concluding that the flaws with respect to its antitrust 16 claims also meant that the state-law claims were not viable. Seeid . at 404-05. 17 The district court denied Anderson's request for permission to file an amended 18 complaint, noting its discretion to deny such a request "where a plaintiff fails to demonstrate it could 19 remedy the complaint's deficiencies," 732 F.Supp.2d at 405. The court found that in this case, 20 [t]he defects in Anderson's Complaint are not curable . The context of 21 the alleged antitrust conspiracy--the Surcharge that Anderson tried to impose 22 on the industry to Anderson's advantage and the disadvantage of everyone 23 else--belies the viability of Anderson's antitrust claim . Anderson cannot deny 24 that it decided to impose a Surcharge, and the Court must view any additional 25 allegations of conspiratorial behavior through the lens of the Surcharge. . . . 26 Anderson's antitrust claim . . . is base d on an economically implausible theory 27 . . . in which the Defendants merely reacted to a common and dramatic market 28 stimulus

. 29 The incurability of Anderson's antitrus t allegations, true as to all the 30 Defendants, is especially true as to AMI, DSI, and Hudson. AMI continued 31 to ship magazines to Anderson and thus did not participate in the boycott of 32 Anderson, the heart of this action. DSI cannot be held liable merely because 33 it is a subsidiary of AMI, which is all Anderson alleges. Amending the 34 Complaint's allegations as to Hudson would likewise be futile because there 35 is no conceivable role for Hudson in the alleged conspiracy : as a wholesaler, 36 Hudson could not cut off Anderson's magazine supply; and Anderson has 3719 withdrawn its allegation that Hudson has taken over Anderson's retail 1 distribution business. 2 In addition to the overall implausibility of Anderson's antitrust claim, 3 the elimination of Hudson from the alleged conspiracy necessitates dismissal 4 of the entire Complaint with prejudice . Anderson has argued that Hudson was 5 critical to the conspiracy . . . . Yet because Anderson cannot allege that 6 Hudson participated in the conspiracy , Anderson's Complaint is incurable by 7 its own admission. 8 732 F.Supp.2d at 405 (emphases added). 9

E. Anderson's Motion for Reconsideration and for Permission ToFile Its Proposed Amended 10 Complaint 11 Anderson timely moved pursuant to Fed. R. Civ. P. 59(e) for reconsideration, arguing 12 principally that, in dismissing the Complaint, th e district court drew unjustified inferences and 13 overlooked allegations of material facts. Anderson also sought reconsideration of the denial of its 14 request for leave to file an amended complaint, and it attached the proposed amended complaint to 15 its motion. The PAC reiterates certain allegations made in the Complaint and contains specific 16 additional allegations as to meetings, conversations, and e-mails between or among various named 17 individual coconspirators on or about specific dates. It includes the following allegations: 18 [F]our days after Anderson's public announcement of the surcharge , the 19 presidents of the two largest national distributors, Castardi, the president of 20 Curtis, and Michael Duloc ("Duloc"), the president and CEO of Kable, 21 attended a meeting on Sunday, January 18, 2009 to plan their collusive action

. 22 Those two competitors represent and act on behalf of all but one of the 23 defendant publishers: Curtis represents and acts on behalf of AMI, Hachette 24 and Rodale; and Kable represents and acts on behalf of Bauer. The only 25 publisher not present or represented at the Sunday meetings was defendant 26 Time and its national distributor, TWR

. 27 57. On January 22, 2009, however, four days after the Sunday 28 meeting, Kable, pursuant to the conspiracy, communicated with its competitor, 29 TWR, ostensibly to "catch up on a few" unspecified "IPDA type items ." The 30 IPDA--or International Periodical Distributors Association--is precisely the 31 type of trade organization that has b een used perennially by competitors to 32 attempt to mask their illegal, anti-competitive communications. 3320 58. In at least two instances during January 2009, after Source had also 1 proposed a $.07 surcharge, certain defendants invited Anderson to join the 2 conspiracy to eliminate Source as a w holesaler by pointing out that Anderson 3 could profit by taking over Source's busin ess and obtaining its profits through 4 price increases imposed on the retailers. Thus, Castardi of Curtis told Mr. 5 Anderson that "you need to let Source go out first ." In certain areas--Arizona, 6 for example--Anderson and Source were the only wholesalers. Once Source 7 was excluded from the market and its business destroyed, Castardi told Mr. 8 Anderson, in words or substance, that Anderson could use its regional market 9 power to "get all your [Anderson's] profits from the retailers ." And in a phone 10 call with Frank Stockard, Presid ent of Anderson, Duloc of Kablediscussed the 11 idea of offering Anderson exclusivity in certain territories in exchange for 12 Anderson retracting the proposed surcharg e. According to Duloc, Anderson 13 could obtain the profits it desired by using its exclusivity arrangement to 14 increase the prices to retailers. Anderson refused to participate in this blatantly 15 unlawful market allocation. Kable res ponded by reaffirming its participation 16 in defendants' boycott of Anderson, th ereby refusing to supply Anderson with 17 the magazines it distributes, including those published by defendant Bauer. 18 (PAC ¶¶ 56-58 (emphases added).) According to th e Complaint, "Duloc from Kable" proceeded to 19 solicit Sullivan, "the president and CEO of . . . Comag to join defendants' conspiracy" to end 20 shipments to Anderson and Source. (PAC ¶ 59.) Comag, however, refused (seeid .), and subsequent 21 [e]-mail exchanges and transmissions among defendants Rodale , DSI , AMI 22 and Bauer , show that defendants perceived Comag's actions as a potential 23 threat to the cohesion and unity of their conspiracy and to defendants' goal for 24 100% participation by the publishers and national distributors in the boycott 25 of Anderson and Source. On January 29, 2009, Richard Alleger, a vice 26 president at Rodale, sent an e-mail to Michael Porche ("Porche"), the president 27 and CEO of DSI , stating that he had just read an e-mail from Comag to its 28 clients: "they have reached an understanding with BOTH Anco [i.e. , 29 Anderson] and Source and will continue to SHIP! Sullivan [the CEO of 30 Comag] is dangerous ." Porche forwarded the message to the president of 31 AMI --Rodale's competitor--who in turn forwarded it to Michael Roscoe, a 32 consultant and former DSI employee, who was one of the conduits through 33 which the conspiracy was effectuated. 34 61. Two days later, on Saturday, January 31, Rodale complained again, 35 this time to Bauer, another of its co-conspirators and competitors , that Comag 36 had agreed to continue to supply Source. Confirming the intent, and obviously 37 anticipating the success, of the conspiracy, Bauer reassured Rodale , stating: 38 "Doesn't matter [S]ource won't be around much longer ." 39 (PAC ¶¶ 60-61 (emphases added).) 4021 In the meantime, according to the proposed amended complaint, 1 [o]n or about January 25, 2009, the presid ents of competitors TWR and Kable 2 scheduled a breakfast meeting for Thursday, January 29, 2009to discuss the 3 conspiracy. 4 63. Hudsonwas at the heart of the cons piratorial meetings. After 5 business hours on or about January 29, 2009 , key employees of certain 6 defendants--ostensible competitors--including Dennis Porti of Curtis and 7 Michael Cvrlje of TWR , met at Hudson's offices inNorth Bergen, New Jersey

. 8 David Parry of News Group --a competitor of Hudson--and John Rafferty of 9 DSI, also were present at that January 29 meeting at Hudson's offices . At this 10 and the other meetings among the defendant s, they discussed and planned their 11 collusive activity, including their market allocation agreement with respect to 12 the Anderson and Source business and customers. 13 (PAC ¶¶ 62-63 (as amended by letter from Anderson's counsel to the district court dated October 4, 14 2010 ("Amending Letter"), at 1 (emphases added)).) Thus, in late January, 15 Curtis, on behalf of publishers Hachette, Rodale and AMI, and Kable, on 16 behalf of publisher Bauer , acting in concert with the other defendants and 17 pursuant to and in furtherance of defendants' conspiracy to eliminate Anderson 18 as a wholesaler, . . . cut Anderson o ff from its supply of their magazines

. . . . 19 [O]n the morning of January 29, 2009, Curtis sent an e-mail to its publisher 20 clients, informing them that, "effective immediately, Curtis is suspending all 21 further shipments of magazines to all Anco [i.e., Anderson] wholesaler 22 operations ." Curtis clients AMI and Hache tte cut off Anderson soon afterward 23

. . . . 24 (PAC ¶ 66 as amended by Amending Letter at 2 (emphases added).) Anderson alleged that the only 25 magazines it received from AMI and Hachette thereafter were "a limited number of magazines . . . 26 that were already 'in the pipeline' from the mag azine printers and could not be diverted." Id

. 27 On Monday February 2, two business days later, TWR and Time cut off the supply of 28 Time's magazines to Anderson. (SeePAC ¶ 67.) Although on January 31, TWR's CEO Jacobsen had 29 led Anderson to believe that TWR agreed to a continuing relationship, with financial accommodations 30 that obviated Anderson's proposed Surcharge, TWR and Time instead joined, or had joined, the 31 agreement to boycott Anderson: 3222 [Anderson] was led by Jacobsen to believe that TWR and Anderson had an 1 agreement that would obviate the need for a surcharge, an agreement for an 2 increase of 2.00% in the discount to Anderson of the magazines' cover prices 3 for all Timeweeklies, and 2.75% for all Peopleweeklies. Anderson also was 4 led to believe by Jacobsen that TWR also agreed to discuss scan-based trading 5 on Monday, February 2, 2009, in return for which, after the scan-based trading 6 call, Anderson would make a $13 million payment to TWR for amounts 7 supposedly due. Anderson rescinded its fee proposal as a result of this 8 compromise settlement. 9

. . . . 10 67. On February 2, Time and TWR--acting in concert with the other 11 defendants, and pursuant to and in furtherance of defendants' conspiracy to 12 eliminate Anderson as a wholesaler--reneged on its agreement to continue to 13 supply Time's magazines to Anderson. Jacobsen informed Anderson that 14 TWR and Time executives had decided "to change the channel," that "they 15 were going to have to use two wholesal ers," and that "that was the way it was 16 going to be." 17

. . . . 18 70. Statements made by the defendants to Anderson also make clear 19 that the defendants, as a result of their inter-competitor meetings and 20 communications, had agreed to a coordinated boycott of Anderson and Source. 21 On or about January 21, 2009, after talki ng with representatives of TWR and 22 Kable, Mr. Anderson spoke with Castardi, the president and CEO of defendant 23 Curtis. Castardi, acting on behalf of Curtis as well as all the publishers 24 represented by Curtis--including publisher defendants AMI, Hachette, and 25 Rodale--told Mr. Anderson, in words or substance , that "I [Castardi] don't want 26 a problem. I would like to get this worked out. But I'm going to have to go 27 with whatever Rich [Jacobse n, CEO of defendant TWR] does ." When Mr. 28 Anderson later told Jacobsen on January31, 2009 what Castardi had told him-- 29 that "[Castardi's] going whatever way you [Jacobsen] go"--Jacobsen did not 30 deny it, but instead crossed his arms, nodded in agreement and smiled. 31 71. At the January 31 meeting with Jacobsen, Jacobsen told Mr. 32 Anderson that he "ha[d] Greg Mays [the CEO of Source] flying in at 1:00 pm 33 to meet with me. And I'm going to deliv er the message that, as long as I'm at 34 TWR or Ann Moore is at Time, we w ill never, ever do business with Source 35 again." Indeed, TWR's competitor, Curtis, was already aware of this 36 information--the same day, a Source executive was advised by Castardi, the 37 president of Curtis that, on January 31, he (Castardi) knew, with "100% 38 certainty," that TWR, Bauer and AMI would refuse to supply product to 39 Source--even though, by this time, Source had publicly rescinded its surcharge 40 proposal. 41 (PAC ¶¶ 65, 67, 70-71 (emphases added).) 4223 In an order dated October 25, 2010, also reported at 732 F.Supp.2d 389, the district 1 court denied Anderson's motions for reconsideration and for leave to file the proposed amended 2 complaint, seeid . at 406-07. In denying reconsideration, the court noted principally that Anderson 3 did not point to anything the court had overlooked butmerely reargued contentions already addressed 4 by the court. 5 In its Opinion, the Court found that the alleged antitrust conspiracy was not 6 plausible because "publishers and national distributors have an economic self7 interest in more wholesalers, not fewer; more wholesalers yields greater 8 competition, which is good for suppliers," (Op.8.) Specifically, the Court held 9 that "it is implausible that magazine publishers would conspire to deny 10 retailers access to their own products," (Id .), and noted that, in the Complaint, 11 Anderson itself pointed out that its elimination as a wholesaler has 12 substantially reduc[ed] the output of magazines . . . and the ability of retailers 13 to obtain those magazines. . . . Because "determining whether a complaint 14 states a plausible claim is context-sp ecific, requiring the reviewing court to 15 draw on its experience and common sense," Ashcroft v. Iqbal , --- U.S. ----, ---- 16 , 129 S.Ct. 1937, 1940, 173 L.Ed.2d 868 (2009), the Court's conclusion was 17 neither impermissible, nor "clear error." 18 Anderson also argues that the Court's determination that the 7-cent 19 surcharge was a "non-negotiable take-it-or-leave-it" demand was "mistaken" 20 and "overlooks the fact, recognized in another part of the Court's Opinion, that 21 neither Anderson nor Defendants treated it as such and that Anderson was 22 entirely flexible and willing to compromise . . . ." (Pl. Mem. 4.) This argument 23 is unavailing. Anderson impliedly admits that the Court did not "overlook" 24 this information because, as Anderson points out, the Court recognized in 25 another part of its Opinion that the Defendants had varied reactions to the 26 surcharge. Additionally, the fact that the Defendants had several different 27 reactions to the surcharge--whether the surcharge was negotiable or not-- 28 clearly suggests the absence of an antitrust conspiracy . Plaintiffs impliedly ask 29 the Court to assume that either (1) the wholesalers first had several different 30 reactions to the announced surcharge and then abruptly changed course , 31 deciding to engage in unlawful collective action; or (2) the original non32 parallel conduct was nothing more than a ruse . The most plausiblescenario, 33 however, is that the Defendants each separatelycame to a similar conclusion-- 34 that they did not want to pay a 7-cent surcharge. Thus, the Court permissibly 35 determined that the Defendants' rejection of the surcharge was not plausibly 36 the product of collective action and was simply "a common response to a 37 common stimulus ." 38 732 F.Supp.2d at 406-07 (other internal quotation marks omitted) (emphases added). 3924 The district court denied Anderson's motion for permission to file its proposed 1 amended complaint, attached to the motion for reconsideration, stating only as follows: 2 As to Plaintiffs' request for leave to amend its Complaint, there is no basis for 3 it. The addition of numerous conclusory allegations does not cure the 4 deficiencies of the Complaint the Court dismissed on August 2, 2010[.] 5 Id . at 407. 6 II. DISCUSSION 7

On appeal, Anderson contends principally that the fact-specific allegations of its 8 Complaint and of the proposed amended complaint--which the district court refused to allow 9 Anderson to file, ruling that it was conclusory and did not cure the deficiencies that the court found 10 in the Complaint--sufficed to support a plausible claim of conspiracy and thereby to state a claim 11 under § 1 of the Sherman Act. Whether or not the district court correctly viewed the allegations of 12 the Complaint itself as too conclusory, we conclude that the court erred in ruling that the additional 13 factual allegations in the PAC were equally c onclusory and provided no plausible basis for an 14 inference of conspiracy. In light of the PAC's alle gations, we have difficulty with the court's antitrust 15 analysis and its application of Twombly 's plausibility test. 16

A. The Sherman Act, Plausibility, and Standards of Review 17 Rule 8 of the Federal Rules of Civil Proce dure provides that a complaint seeking relief 18 "must contain . . . a short and plain statement of the claim showing that the pleader is entitled to 19 relief." Fed. R. Civ. P. 8(a)(2). This Rule doe s not countenance pleadings that are conclusory; it 20 requires factual allegations that are sufficient to "giv e the defendant fair notice of what the . . . claim 21 is and the grounds upon which it rests." Twombly , 550 U.S. at 555 (internal quotation marks 22 omitted). Conclusory allegations of "participation" in a "conspiracy" have long been held insufficient 2325 to state a claim. See , e.g. , X-Men Security, Inc. v. Pataki , 196 F.3d 56, 71 (2d Cir. 1999); Thomas 1 v. Roach , 165 F.3d 137, 147 (2d Cir. 1999); Ostrer v. Aronwald , 567 F.2d 551, 553 (2d Cir. 1977). 2 "Rule 8(a) 'contemplate[s] the st atement of circumstances, occurren ces, and events in support of the 3 claim presented' and does not authorize a pleader's 'bare averment that he wants relief and is entitled 4 to it.'" Twombly , 550 U.S. at 555 n.3 (quoting 5 C. Wright & A. Miller, Federal Practice & Procedure 5 § 1202, at 94, 95 (3d ed. 2004)). 6 For a complaint to be sufficient, the claim asserted must be one that, in light of the 7 factual allegations, is at least "plausible." E.g. , Twombly , 550 U.S. at 570. To present a plausible 8 claim, the "pleading must contain something more . . . than . . . a statement of facts that merely creates 9 a suspicion[of] a legally cognizable right of action." Id . at 555 (internal quot ation marks omitted) 10 (emphasis ours). It must allege facts that would besufficient to permit a reasonable inference that the 11 defendant has engaged in culpable conduct: "A clai m has facial plausibility when the plaintiff pleads 12 factual content that allows the court to draw the reasonable inference that the defendant is liable for 13 the misconduct alleged." Iqbal , 129 S. Ct. at 1949. 14 The Sherman Act prohibits, inter alia , "[e]very contract, combination . . . , or 15 conspiracy, in restraint of trade or commerce among the several States." 15 U.S.C. § 1. 16 Because § 1 of the Sherman Act " does not prohibit [all] unreasonable 17 restraints of trade ... but only restraints effected by a contract, combination, 18 or conspiracy," Copperweld Corp. v. Independence Tube Corp. , 467 U.S. 752, 19 775 (1984), "[t]he crucial question" is whether the challenged anticompetitive 20 conduct "stem[s] from independent decision or from an agreement, tacit or 21 express"

. . . . 22 Twombly , 550 U.S. at 553 (quoting Theatre Enterprises, Inc. v. Paramount Film Distributing Corp. , 23 346 U.S. 537, 540 (1954) (emphasis ours)). 24 Agreements within the scope of § 1 may be either "horizontal," i.e. , "agreement[s] 25 between competitors at the same level of the market structure," or "vertical," i.e. , "combinations of 2626 persons at different levels of the market structure, e. g. , manufacturers and distributors." United States 1 v. Topco Associates, Inc. , 405 U.S. 596, 608 (1972). As to horizontal agreements, "[o]ne of the 2 classic examples of a per seviolation of § 1 is an agreement be tween competitors at the same level 3 of the market structure to allocate territories in order to minimize competition." Id .; seeid . at 609 n.9 4 ("remov[ing any] doubt" that "horizontal territorial limitations, unaccompanied by price fixing, are 5
per seviolations of the Sherman Act"). Vertical restraints that do not involve price-fixing are 6 generally judged under the "rule of reason, which re quires a weighing of the relevant circumstances 7 of a case to decide whether a restrictive practice constitutes an unreasonable restraint on competition." 8 Monsanto Co. v. Spray-Rite Service Corp. , 465 U.S. 752, 761 (1984); see , e.g. , Continental T.V., Inc. 9 v. GTE Sylvania Inc. , 433 U.S. 36 (1977). The Supreme "Court has long held that certain concerted 10 refusals to deal or group boycotts are so likely to restrict competition withoutany offsetting efficiency 11 gains that they should be condemned as per seviolations of § 1 of the Sherman Act." Northwest 12 Wholesale Stationers, Inc. v. P acific Stationery & Printing Co. , 472 U.S. 284, 290 (1985); see , e.g. , 13 Klor's, Inc. v. Broadway-Hale Stores, Inc. , 359 U.S. 207 (1959). 14 In Klor's , the plaintiff retailer ("Klor's"), which competed against a national retail chain 15 ("Broadway-Hale"), alleged a conspiracy that was both vertical and horizontal. It alleged, inter alia , 16 that 10 national manufacturers of household appliances "conspired among themselves and with 17 Broadway-Hale . . . not to sell to Klor's." Id . at 209. The Supreme Court noted that "some 18 agreements['] . . . validity depend[s] on the surrounding circumstances," while other "classes of 19 restraints . . . from their 'nature or character' [a]re unduly restrictiv e, and hence forbidden by both the 20 common law and the statute," id . at 211 (quoting Standard Oil of New Jersey v. United States , 221 21 U.S. 1, 58, 65 (1911)). Reversing the grant of su mmary judgment against Klor's, the Court found that 22 "Klor's allegations clearly show onetype of trade restraint and publicharm the Sherman Act forbids," 23 Klor's , 359 U.S. at 210. "Group boycotts, or concerted re fusals by traders to deal with other traders, 24 have long been held to be in the forbidden category." Id . at 212. 2527 In order to establish a conspiracy in viol ation of § 1, whether horizontal, vertical, or 1 both, proof of joint or concerted action is required; proof of unilateral action does not suffice. See , 2
e.g. , Monsanto , 465 U.S. at 761 ("there is [a] basic dis tinction between concerted and independent 3 action--a distinction not always clearly drawn by parties and courts"). "Circumstances must reveal 4 'a unity of purpose or a common design and unders tanding, or a meeting of minds in an unlawful 5 arrangement.'" Id . at 764 (quoting American Tobacco Co. v. United States , 328 U.S. 781, 810 6 (1946)). "Independent action is not proscribed. A manufacturer of course generally has a right to 7 deal, or refuse to deal, with whomever it likes, as long as it does so independently ." Monsanto , 465 8 U.S. at 761 (emphasis added). 9 Although the district court in the present case, as noted in Part I.D. above, faulted 10 Anderson's Complaint for "not contain[ing] allegations of direct evidence of a conspiracy," 732 11 F.Supp.2d at 397 (emphasis added), conspiracies are rarely evidenced by explicit agreements, but 12 nearly always must be proven through "inferences that may fairly be drawn from the behavior of the 13 alleged conspirators," Michelman v. Clark-Schwebel Fiber Glass Corp. , 534 F.2d 1036, 1043 (2d Cir. 14 1976); see , e.g. , United States v. Snow , 462 F.3d 55, 68 (2d Cir. 2006) ("c onspiracy by its very nature 15 is a secretive operation, and it is a rare case where all aspects of a conspiracy can be laid bare in court 16 with . . . precision") (internal quotation marks omitted), cert. denied , 549 U.S. 1150 (2007). In order 17 to prove a conspiracy, "the antitrust plaintiff should present direct or circumstantialevidence that 18 reasonably tends to prove that the [defendant] and others had a conscious commitment to a common 19 scheme designed to achieve an unlawful objective." Monsanto , 465 U.S. at 764 (internal quotation 20 marks omitted) (emphasis added). 21 At the pleading stage, a complaint claiming conspiracy, to be plausible, must plead 22 "enough factual matter (taken as true) to suggest that an agreement was made," i.e. , it must provide 2328 "some factual context suggesting [that the parties reached an] agreement," not facts that would be 1 "merely consistent" with an agreement. Twombly , 550 U.S. at 556, 549, 557. A complaint alleging 2 merely parallel conduct is not sustainable: 3 A statement of parallel conduct, even conduct consciously undertaken, needs 4 some setting suggesting the agreement necessaryto make out a § 1 claim[, 5 some] further circumstance pointi ng toward a meeting of the minds . . . . An 6 allegation of parallel conduct is thus mu ch like a naked assertion of conspiracy 7 in a § 1 complaint: it gets the complaint close to stating a claim, but without 8 some further factual enhancement it stops short of the line between possibility 9 and plausibility of "entitle[ment] to relief. . . . [T]erms like "conspiracy," or 10 even "agreement," are border-line: they might well be sufficient in 11 conjunction with a more specific allegation--for example, identifyinga written 12 agreement or even a basis for inferring a tacit agreement

. . . . 13 Id . at 557 (other internal quotation marks omitted) (emphases added). 14 However, to present a plausible claim at th e pleading stage, the plaintiff need not show 15 that its allegations suggesting an agreement are morelikely than not true or that they rule out the 16 possibility of independent action, as would be required at later litigation stag es such as a defense 17 motion for summary judgment, see , e.g. , Matsushita Electric Industrial Co. v. Zenith Radio Corp. , 475 18 U.S. 574, 597-98 (1986), or a trial, see , e.g. , Monsanto , 465 U.S. at 768; Theatre Enterprises , 346 U.S. 19 at 540-41. 20 Asking for plausiblegrounds to infer an agreement does not impose a 21 probability requirement at the pleading stage ; it simply calls for enough fact 22 to raise a reasonable expectationthat discoverywill reveal evidence of illegal 23 agreement. 24 Twombly , 550 U.S. at 556 (emphases added). 25 Because plausibility is a standard lower th an probability, a given set of actions may 26 well be subject to diverging interpretations, each of which is plausible. See generallyAnderson v. 27 Bessemer City , 470 U.S. 564, 575 (1985) ("two or more witnesses" may tell mutually inconsistent but 28 "coherent and facially plausible stor[ies]"). The choice between or among plausible inferences or 2929 scenarios is one for the factfinder, seeid .; Monsanto , 465 U.S. at 766 & n.11 (the meaning of 1 documents that are "subject to" divergent "reasonable . . . interpret[ations]" either as "referring to an 2 agreement or understanding that distributors and retailers would maintain prices" or instead as 3 referring to unilateral and independent actions, is "properly . . . left to the jury"); id . at 767 n.12 ("The 4 choice between two reasonable interpretations of . . . testimony properly [i]s left for the jury."). 5 The choice between two plausible inferences that may be drawn from factual 6 allegations is not a choice to be made by the court on a Rule 12(b)(6) motion. "[F]act-specific 7 question[s] cannot be resolved on the pleadings." Todd v. Exxon Corp. , 275 F.3d 191, 203 (2d Cir. 8 2001) ("Todd "). A court ruling on such a motion may not properly dismiss a complaint that states a 9 plausible version of the events merely because the court finds a different version more plausible. 10 Rather, in determining whether a complaint st ates a claim that is plausible, the court 11 is required to proceed "on the assumption that all the [factual] allegations in the complaint are true ." 12 Twombly , 550 U.S. at 555 (emphasis added). Even if their truth seems doubtful, "Rule 12(b)(6) does 13 not countenance . . . dismissals ba sed on a judge's disbelief of a co mplaint's factual allegations," id

. 14 at 556 (internal quotation marks omitted). Give n that the plausibility requirement "does notimpose 15 a probabilityrequirement at the pleading stage," the TwomblyCourt noted that "a well-pleaded 16 complaint may proceed even if it strikes a savvy judge that actual proof of the facts alleged is 17 improbable, and that a recovery is very remote and unlikely." Id . (internal quotation marks omitted) 18 (emphases added). 19 Whether a complaint alleges sufficient facts to state a claim on which relief can be 20 granted is a question of law, see , e.g. , De Jesus v. Sears, Roebuck & Co. , 87 F.3d 65, 69 (2d Cir. 21 1996), which we consider de novo , see , e.g. , Starr v. Sony BMG Music Entertainment , 592 F.3d 314, 22 321 (2d Cir. 2010) ("Starr "), cert. denied , 131 S. Ct. 901 (2011); Arar v. Ashcroft , 585 F.3d 559, 567 2330 (2d Cir. 2009) (en banc) ("Arar "), cert. denied , 130 S. Ct. 3409 (2010); Todd , 275 F.3d at 197. In 1 reviewing the complaint, we "giv[e] no effect to" a ssertions of law or to "legal conclusions couched 2 as factual allegations," Starr , 592 F.3d at 321; but "we accept as true the factual allegations of the 3 complaint, and construe all reasonable inferences that can be drawn from the complaint in the light 4 most favorable to the plaintiff," Arar , 585 F.3d at 567; see , e.g. , Papelino v. Albany College of 5 Pharmacy of Union University , 633 F.3d at 85 n.1; Pension Committee of University of Montreal 6 Pension Plan v. Banc of America Securities LLC , 568 F.3d 374, 381 (2d Cir. 2009); Roth v. Jennings , 7 489 F.3d 499, 501 (2d Cir. 2007). 8 When a party requests leave to amend its complaint, permission generally should be 9 freely granted. See , e.g. , Foman v. Davis , 371 U.S. 178, 182 (1962); Fed. R. Civ. P. 15(a)(2). We 10 review the district court's denial of a request for leave to amend for abuse of discretion. See , e.g. , 11
Foman , 371 U.S. at 182; Starr , 592 F.3d at 321. An abuse of disc retion may consist of an erroneous 12 view of the law, a clearly erroneous assessment of the facts, or a decisi on that cannot be located 13 within the range of permissible decisions. See , e.g. , Sims v. Blot , 534 F.3d 117, 132 (2d Cir. 2008). 14 Leave to amend may properly be denied if the amendment would be futile, see , e.g. , Foman , 371 U.S. 15 at 182, as when the proposed new pleading fails to state a claim on which relief can be granted, see , 16
e.g. , Ricciuti v. N.Y.C. Transit Authority , 941 F.2d 119, 123 (2d Cir. 1991). The adequacy of a 17 proposed amended complaint to state a claim is to be judged by the same standards as those governing 18 the adequacy of a filed pleading. See , e.g. , id . Hence, a denial of leave to amend on the ground that 19 the proposed new complaint does not state a claim on which relief can be granted is a decision based 20 on a legal ruling and is one that we also review de novo . See , e.g. , Starr , 592 F.3d at 321. 2131 B. Differences Between theTwombly Complaint and Anderson's PAC 1 With respect to the application in the pres ent case of the plausibility principles set out 2 in Twombly , it is important to bear in mind the nature of the complaint with which the Supreme Court 3 was concerned in Twombly . The Court noted that the question be fore it was "whether a § 1 complaint 4 can survive a motion to dismiss when it alleges th at major telecommunications providers engaged in 5 certain parallel conduct unfavorable to competition, absent some factual context suggesting 6 agreement, as distinct from identical, independent action ." 550 U.S. at 548-49 (emphasis added). The 7 Court pointed out that 8 [w]ithout more , parallel conduct does not suggestconspiracy, and a conclusory 9 allegation of agreement at some unidentified point does not supply facts 10 adequate to show illegality. Hence, when allegations of parallel conduct are 11 set out in order to make a § 1 claim, they must be placed in a context that 12 raises a suggestion of a preceding agreement , not merely parallel conduct that 13 could just as well be independent action. 14 Id . at 556-57 (emphases added). 15 The complaint at issue in Twomblyprovided no such context. The claim was that 16 entrenched local telephone companies (the "incumbe nt local exchange carriers" or "ILECs") violated 17 § 1 by preventing the entry of new carriers into th eir respective territories. The complaint did not, 18 however, plausibly allege an agreement between or among ILECs; rather, the "plaintiffs . . . 19 proceed[ed] exclusivelyvia allegations of parallel conduct," Twombly , 550 U.S. at 565 n.11 20 (emphasis added). They alleged that the ILECs "cons pired to restrain trade in two ways": first by 21 "engag[ing] in parallel conduct in their respective service areas to inhibit the growth of upstart" 22 competitors, id . at 550 (internal quotation marks omitted); and second by "agree[ing] . . . to refrain 23 from competing against one another," with such an agreement, "'upon information and belief,'" simply 24 "to be inferredfrom the ILECs' common failuremeaningfully [to] pursu[e]" what the plaintiffs 25 characterized as "attractive business opportunit[ies] in contiguous markets where they possessed 2632 substantial competitive advantages," id . at 551 (other internal quotation marks omitted) (emphases 1 added). Thus, the thrust of the Twomblycomplaint was that "some illegal agreement may have taken 2 place between unspecified persons at different ILECs (each a multibillion dollar corporation with 3 legions of management level employ ees) at some point over seven years ," id . at 560 n.6 (emphases 4 added), as the complaint merely "identif[ied] a 7-y ear span in which the § 1 violations were supposed 5 to have occurred" and "mentioned no specific time, place, or person involved in the alleged 6 conspiracies ," id . at 565 n.10 (emphasis added). "[N]othing in the [Twombly ] complaint intimate[d] 7 that the resistance to the upstarts was anything more than the natural, unilateral reaction of each ILEC 8 intent on keeping its regional dominance," id . at 566; the "complaint le[ft] no doubt that plaintiffs 9 rest[ed] their § 1 claim on descriptions of parallel conduct and not on any independent allegation of 10 actual agreement among the ILECs ," id . at 564 (emphasis added). 11 Anderson's proposed amended complaint in the present case is vastly different from 12 the complaint at issue in Twombly . Although the district court stated that "Anderson claims an 13 economically implausible antitrust conspiracy based on sparse parallel conduct allegations," 732 14 F.Supp.2d at 402, that "Anderson does not place its antitrust conspir acy in a context suggesting a 15 preceding agreement," id ., and that the PAC merely "add[ed] numerous conclusory allegations" that 16 did nothing to cure those perceived defects, id . at 407, the court's criticisms did not accurately 17 characterize the PAC. The PAC alleges actual agreement; it alleges not just that all of the defendants 18 ceased, in virtual lock-step, to deal with Anders on, but alleges that on various dates within the 19 preceding two-week period defendants and News Group--through their executives, 10 of whose names 20 or positions are specified--had met or communicated with their competitors and others and made 21 statements that may plausibly be interpreted as evincing their agreement to attempt to eliminate 22 Anderson and Source as wholesalers in the single-c opy magazine market and to divide that market 2333 between News Group and Hudson. The PAC alleges that defendants' meetings and communications 1 began four days after Anderson's January 14 telephone interview with The New Single Copy 2 magazine and included the following: 3

# on Sunday January 18, Castardi , Curtis's president, met with Duloc , Kable's 4 president and CEO (seePAC ¶ 56); 5

# Curtis and Kable, competitors whose publisher clients included AMI, Rodale, 6 Hachette, and Bauer, thereafter refused to enter into any legitimate substantive 7 negotiations with Anderson with respect to the Surcharge (seePAC ¶ 66); 8

# on January 22, Kable communicated with its competitor TWR (seePAC ¶ 57), and 9 on Sunday January 25, Duloc , the president of Kable, and Jacobsen , the president of 10 TWR, scheduled a breakfast meeting for January 29 (seePAC ¶¶ 56, 62); 11

# on or about January 29, after business hour s, Hudson hosted a meeting at its offices 12 in North Bergen, New Jersey, attended by its competitor News Group (represented by 13 David Parry ) and by key employees of three of the distributor defendants: Dennis 14 Portiof Curtis, John Raffertyof DSI, Michael Cvrljeof TWR (seePAC ¶ 63 (as 15 amended by Amending Letter at 1)); 16

# on Thursday January 29, Curtis sent an e- mail to its publisher clients stating that it 17 was immediately ceasing shipments to Anders on; Curtis clients AMI and Hachette cut 18 off Anderson soon afterward (seePAC ¶ 66); Kable, on behalf of Bauer, also cut 19 Anderson off from its supply of Bauer's magazines (seePAC ¶¶ 58, 66); 20

# on Monday February 2, TWR, despite Jacobsen's having led Anderson to believe 21 on January 31 that Time would continue toship magazines to Anderson, cut Anderson 22 off (seePAC ¶¶ 65, 67-69). 23

In the above-cited paragraphs, the PAC alleged that in those meetings and 24 communications the defendants planned a concerted boycott of Anderson, or Source, or both. 25 Lending support to an inference of such planning, the PAC includes other allegations of 26 communications between defendants and of statements by certain of the defendants to Anderson and 27
Source: 28

# Castardiof Curtis and Dulocof Kable suggested to Anderson that Source should 29 be eliminated as a wholesaler and that Anderson could then obviate the need for its 3034 Surcharge by simply becoming the publishers' exclusive wholesaler in areas formerly 1 serviced by both Anderson and Source and imposing increased prices on retailers; 2 however, Castarditold Anderson's CEO "'you need to let Source go out first'" (PAC 3 ¶ 58); 4

# when Anderson declined the invitation to join the group planning to eliminate 5 Source, Kable refused to continue to supply Anderson with magazines published by 6 Kable's clients, including Bauer (seePAC ¶ 58); 7

# when Anderson attempted to negotiate with Curtis, Castardisaid he, on behalf of 8 AMI, Hachette, and Rodale, would do whatever TWR did; when Anderson's CEO met 9 with TWR's CEO Jacobsen on January 31 and reported Castardi's statement, Jacobsen 10 just nodded, smiled, and crossed his arms (seePAC ¶ 70). 11 The PAC also alleged that 12

# in late January, Kable's president Duloccontacted Comag's president and CEO 13 Sullivan and urged him to have Comag stop shipping to Anderson and/or Source (see 14 PAC ¶ 59); 15

# on January 29, Rodale's vice president Richard Allegersent an e-mail to Michael 16 Porche , DSI's president and CEO, stating that Comag "'will continue to SHIP!'" to 17 "'BOTH Anco [i.e. , Anderson] and Source,'" and that "'Sullivan . . . is dangerous'" 18 (PAC ¶ 60); 19

# DSI's Porcheforwarded Rodale's concerned e-mail to the president of AMI (David 20 Pecker ), a Rodale competitor (seePAC ¶¶ 51, 60); 21

# on January 31, Rodale complained to its competitor Bauer about Comag's agreement 22 to continue supplying Source, and Bauer re sponded that it "'[d]oesn't matter[; S]ource 23 won't be around much longer '" (PAC ¶ 61 (emphasis ours)); 24

# on January 31, TWR's Jacobsentold Anderson that he was about to inform Source 25 that "'as long as I'm at TWR or Ann Mooreis at Time, we will never, ever do business 26 with Source again'" (PAC ¶ 71); 27
28 # earlier on January 31, Curtis's Castardihad told a Source executive that Castardi 29 "knew , with '100% certainty ,' that TWR, Bauer, and AMI would refuse to supply 30 product to Source" (PAC ¶ 71 (emphases ours)). 31 In sum, taking the PAC's allegations as tothe chronology as true, the presidents of 32 Curtis and Kable met on January 18; Kable and Curtis thereafter refused even to enter into legitimate 33 negotiations with Anderson; Kable contacted TW R on January 22; on January 25, the presidents of 3435 Kable and TWR scheduled a breakfast meeting for January 29; on or about January 29, at the offices 1 of Hudson, there was an after-hours meeting whose participants included specified key employees of 2 Curtis, DSI, and TWR--as well as News Group, wh ich was to share the wholesale market with 3 Hudson after Anderson and Source were eliminated. On January 31 Bauer told Rodale that Source 4 "won't be around much longer," which--considering the failure of Curtis, the largest distributor, in its 5 2008 attempt to terminate Anderson unilaterally--was a reassurance that Bauer could not have given 6 on the basis of any one entity's independent conduc t. And on January 31, even before Source was 7 informed by TWR itself that TWR and Time w ould stop doing business with Source, Curtis's 8 president Castardi--although Curtis did not repres ent Time and was TWR's competitor--had said he 9 "knew, 'with 100% certainty'" that Source would be cut off by TWR, which represented Time. At the 10 same time, Castardi said he knew with 100% certainty that Bauer--which was represented by DSI and 11 Kable but not by Curtis--would cease to supply Source. 12 Thus, within days of Anderson's announcement of its proposed Surcharge, each of the 13 four distributor defendants met or communicated withat least two other distributor defendants; both 14 TWR and Curtis met or spoke with all three other distributor defendants; and Kable spoke with at 15 least two other distributor defendants, as well as with Comag, which Kable attempted-- 16 unsuccessfully--to have join the planned boycott of Source and Anderson. Each of the publisher 17 defendants used at least one of the four distributor defendants to manage that publisher's relationships 18 with wholesalers. AMI, Hachette, and Rodale all used both Curtis and DSI as distributors; Bauer used 19 both DSI and Kable as distributors. Rodale and Bauer communicated directly with each other, and 20 Rodale communicated with AMI through DSI. The only two distributors not alleged in the PAC to 21 have communicated directly with each other are DS I and Kable; but at least indirect communication 22 between the two is inferable, given that both of them represented Bauer, and that Bauer on January 2336 31 expressly reassured Rodale that Source would soon be eliminated. The PAC does not include 1 allegations that Time or Hachette met or comm unicated with other publisher defendants; but it does 2 allege that when the distributors they used said Anderson would be cut off, Time and Hachette 3 promptly cut Anderson off. 4 We note that the PAC indicates that DSI is a subsidiary of AMI and that TWR is a 5 subsidiary of Time; and it is well established that a corporation and its wholly-owned subsidiary are 6 not considered separate entities for purposes of § 1 of the Sherman Act, see American Needle, Inc. 7 v. National Football League , 130 S. Ct. 2201, 2211-12 (2010); Copperweld Corp. v. Independence 8 Tube Corp. , 467 U.S. 752, 771 (1984). However, the fact s alleged in the PAC are sufficient to 9 suggest that the cessation of shipments to Anderson resulted not from isolated parent-subsidiary 10 agreements but rather from a lattice-work of horiz ontal and vertical agreements to boycott Anderson. 11 In sum, given the above factual allegations and the reasonable inferences that may be 12 drawn from them, the PAC is sufficient to make Anderson's antitrust claim pl ausible. The district 13 court's ruling that the PAC contained only conclusoryassertions was error, and the court's failure to 14 assume the truth of reasonable inferences that could be drawn from Anderson's allegations, see732 15 F.Supp.2d at 402 ("on a motion to dismiss, . . . factual inferences are not entitled to" be "take[n] . . . 16 as true"), was likewise error. 17

C. Analytical Problems 18 In addition to our conclusion that the distri ct court erred in characterizing the PAC's 19 factual allegations as conclusory and in refusing to accept as true the reasonable inferences that could 20 be drawn from those allegations, we have difficulties with some of the court's analytical constructs, 21 including its application of Twombly 's plausibility test. 2237 1. The Proper Application of the Plausibility Requirement 1 When the district court ruled that Anders on did not state a plausible § 1 claim because 2 "[u]nilateralparallel conduct [by the defendants wa]s completely plausible ," 732 F.Supp.2d at 399 3 (emphases added); see alsoid . at 400, 407, the plausibility inquiry was misdirected. The question at 4 the pleading stage is not whether th ere is a plausible alternative to the plaintiff's theory; the question 5 is whether there are sufficient factual allegations to make the complaint's claim plausible. As 6 discussed in Part II.A. above, the plausibility standard is lower than a probability standard, and there 7 may therefore be more than one plausible interpretation of a defendant's words, gestures, or conduct. 8 Consequently, although an innocuous interpretation of the defendants' conduct may be plausible, that 9 does not mean that the plaintiff's allegation that that conduct was culpable is not also plausible. The 10 view of the district court here that "it is plausiblethat each of the publisher Defendants unilaterally 11 stopped shipping magazines to Anderson rather than pay the Surcharge," 732 F.Supp.2d at 400 12 (emphases added), was thus not a proper basis for finding that Anderson had not pleaded a claim that 13 was plausible. 14 The court also found that the possibility that each of the defendants had acted 15 "separately" in deciding to stop supplying magazines to Anderson was "[t]he most plausible scenario," 16 id . at 407 (emphasis added). But on a Rule 12(b)(6 ) motion it is not the province of the court to 17 dismiss the complaint on the basis of the court's choice among plausible alternatives. Assuming that 18 Anderson can adduce sufficient evidence to support its factual allegations, the choice between or 19 among plausible interpretations of the evidence will be a task for the factfinder. 2038 2. Factual Findings 1 We note also that in finding Anderson's vi ew of the events implausible, or less 2 plausible than the possibility that defendants actedunilaterally, the court essentially made a number 3 of other factual findings. For example, the court f ound that the statements attributed to Curtis's CEO, 4 Robert Castardi, were "not inculpatory." 732 F.Supp.2d at 402. The court found that Castardi's 5 statement to Anderson--that once Source was eliminated Anderson could increase its earnings by 6 having an exclusive territory in which it could rais e prices to retailers, but "'you need to let Source 7 go out first'"--was "not . . . an invitation to join a massive antitrust conspiracy" to eliminate Source. 8 Id . Perhaps it was not; but whether it was or not is a question for a factfinder. As set out in Part II.B. 9 above, there are allegations of statements by, among others, Kable's Duloc, Rodale's Alleger, and 10 TWR's Jacobsen, indicating that de fendants wished to eliminate Source, as well as Bauer's assurance 11 to Rodale that Source would soon be gone. With th e PAC read "as a whole," rather than piecemeal, 12
e.g. , Yoder v. Orthomolecular Nutrition Institute, Inc. , 751 F.2d 555, 562 (2d Cir. 1985), the existence 13 of a conspiracy to eliminate Source could permissibly be inferred; and any ambiguity as to whether 14 the statements to Anderson by Castardi and Duloc constituted invitations to join such a conspiracy 15 would remain to be resolved by a factfinder. In any event, the district court could not properly make 16 an interpretive finding on a Rule 12(b)(6) motion, in e ffect ruling as a matter of law that that Castardi 17 statement was not an invitation to join such a group effort to eliminate Source. 18 The court also found that Castardi's statem ent that he was "'going to have to go with 19 whatever Rich [Jacobsen, CEO of TWR] does' . . . suggests onlythat he would wait to see what TWR 20 did and that, in fact, he had no actual knowledge of Jacobsen's plans regarding Anderson." 732 21 F.Supp.2d at 402 (emphasis added); see alsoid . at 398-99 (finding that defendants' decisions to stop 22 supplying Anderson were "unchoreographed"). Cast ardi might, of course, claim that the court's 2339 interpretation of his statement was what he meant; but in fact stating that he would "go with whatever 1 [Jacobsen] does" is not precisely the same as stati ng that he would "wait to see" what Jacobson would 2 do. And indeed, taking the factual allegations of th e Complaint and the PAC as true, Castardi in fact 3 did not wait to see what TWR actually did, for Ca stardi had Curtis and its publisher clients cut 4 Anderson off on January 29. TWR did not cut Anderson off until February 2. 5 Castardi's statement that Curtis would do what TWR would do, along with Curtis's 6 termination of Anderson in advance of such a termination by TWR, must further be considered in 7 light of two other allegations: (1) that Curtis had been unsuccessful in 2008 wh en it tried to terminate 8 Anderson unilaterally, and (2) that before Source was terminated by TWR, AMI, and Bauer, Castardi 9 told a Source executive that Castardi "knew, 'with 100% certainty,'" that those entities were going to 10 refuse to supply Source. In these circumstances it is plausible to infer that Castardi knew in advance, 11 with certainty, that TWR would cease to supply A nderson; and from that certain foreknowledge, an 12 inference of advance agreement is plausible. 13

3. Other Bases for the Court's Finding of Implausibility 14 a. Varied Responses to the Surcharge 15 We also have difficulties with the district c ourt's view that Anders on's conspiracy claim 16 was implausible because defendants had "a variety of reactions" to Anderson's announcement of its 17 Surcharge, 732 F.Supp.2d at 394, with some publishers or distributors initially entering into 18 negotiations for alternatives to the Surcharge--and suggesting alternatives that varied--and other 19 publishers and distributors not negotiating. The court stated that "[c]onspirators hatching a concerted 20 scheme to destroy Anderson would not have reacted so differently to the Surcharge," id . at 397. 21 However, there is nothing implausible about cocons pirators' starting out in disagreement as to how 2240 to deal conspiratorially with their common problem. As the court itself noted, "the keyparallel 1 conduct allegation" was that all of the publisher and distributor defendants ceased doing business with 2 Anderson, id . at 398 (emphasis added). The court's reliance on the variety of defendants' original 3 reactions failed to take into account that, notwith standing their responses initially, some two weeks 4 later every defendant publisher and distributor acte d, within a span of three business days, to cut 5 Anderson off. 6

b. Collateral Estoppel 7 In analyzing Anderson's claims against each defendant, the district court found that 8 AMI could not have been a member of the allege d conspiracy to boycott Anderson. Citing a February 9 2009 Delaware Chancery Court order, and invoking the principle of collateral estoppel, the district 10 court found that AMI had not cut Anderson off but instead had "continued to ship magazines to 11 Anderson in February 2009, after the alleged boycott occurred," 732 F.Supp.2d at 403. However, 12 given that, in order to determine the preclusive effect of a state-court decision, a federal court must 13 look to the law of that state and should not give the state-court decision any greater preclusive effect 14 than the courts of that state would give it, see , e.g. , Marrese v. American Academy of Orthopaedic 15 Surgeons , 470 U.S. 373, 380 (1985), we have two difficulties with the district court's collateral 16 estoppel ruling. 17 First, the Delaware Chancery decision relied on by the district court merely granted 18 a "Temporary Restraining Order," Ameri can Media, Inc. v. Anderson News, LLC , C.A. No. 19 4369-VCL (Del. Ch. Feb. 13, 2009). Under Delaware law, collateral estoppel, or issue preclusion, 20 is not available unless, inter alia , a question of fact essential to the judgment is litigated and 21 determined in "a valid and final judgment." Messick v. Star Enterprise , 655 A.2d 1209, 1211 (Del. 2241 1995) (internal quotation marks omitted); see , e.g. , The Thomas and Agnes Carvel Foundation v. 1 Carvel , No. 3185-VCP, 2008 WL 4482703, at *5 (Del. Ch. Sept. 30, 2008) (denying collateral 2 estoppel effect to a New York court's findings in granting a preliminary injunction, because that "is 3 not a final judgment of the court on the merits") . The Delaware Chancery Temporary Restraining 4 Order relied on by the district court was not a final judgment. 5 Second, although the Delaware Chancery Te mporary Restraining Order required 6 Anderson to return to AMI--and to Hachette, which wa s also a plaintiff in that action--all of those 7 plaintiffs' magazines that were then in Ande rson's possession, the order made no findings whatever 8 as to when Anderson had received those magazines or when their shipment had been initiated. The 9 Complaint alleged that AMI and Hachette had cut Anderson off "in late January." (Complaint ¶ 47; 10 see also PAC ¶ 66 (alleging that the magazines that werethe subject of the state-court order had been 11 "'in the pipeline' from the magazine printers" before Anderson was cut off "and could not be 12 diverted").) The state court's order made no contrary finding and thus provided no basis for a 13 deviation from the principle that on a Rule 12(b )(6) motion, the district court was required to accept 14 Anderson's allegations as true. 15

c. The Common Stimulus 16 The district court also ruled that Anderson's presentation of a "common economic 17 stimulus, impelling an immediate market reaction," 732 F.Supp.2d at 401, made it impossible for 18 Anderson to plead a viable § 1 cl aim. It stated that "Anderson alleges facts suggesting that the 19 Defendants merely responded to a common market stimulus created by Anderson itself," id . at 402, 20 and that "[h]aving proposed its pay-it-or elseSurcharge, Anderson can not claim collusionin the 21 Defendants' refusal to acquiesce to its self-destructive demand," id . at 401 (emphasis added). We 22 have two difficulties with this reasoni ng. First, the court itself noted (seePart II.C.3.a. above) that 23 several of the defendants had initially entered into negotiations with Anderson for various alternatives 2442 to the Surcharge, and that some had reached agreement on such alternatives, see732 F.Supp.2d 1 at 397. The facts that there were various proposed alternatives to the Surcharge--and that Anderson 2 agreed to some of them--undercut both the court's own view of the Surcharge as a take-it-or-leave-it 3 demand by Anderson and the court's suggestion that the defendants also so viewed it. 4 Second, the mere fact that an offer of goods or services at a given price may be 5 nonnegotiable does not mean that the offerees, in responding to it, cannot violate the antitrust laws. 6 Thus, the TwomblyCourt referred not simply to "responses" to given stimuli, but rather to 7 "independentresponses to common stimuli, or . . . interdependence unaided by an advance 8 understanding among the parties ." Twombly , 550 U.S. at 556 n.4 (internal quotation marks omitted) 9 (emphases added). The presentation of a common economic offer may well lend itself to innocuous, 10 independent, parallel responses; but it does not provide antitrust immunity to respondents who get 11 together and agree that they will boycott the offeror. The latter is what the PAC alleged. 12

d. The Role of Hudson 13 The district court found that, in light of Anderson's withdrawal of its assertion that 14 Hudson took over Anderson's retail distribution busine ss, there was "no conceivable role for Hudson 15 in the alleged conspiracy," 732 F.Supp.2d at 403, 405, because Hudson, a wholesaler rather than an 16 entity higher in the distribution chain, "could not cut off Anderson's magazine supply," id . at 403. We 17 have several difficulties with this analysis. 18 First, as discussed in Part II.A. above, § 1 applies not just to horizontal conspiracies 19 between or among competitors but also to verticalcontracts and to boycotts agreed to by a group of 20 suppliers and their favored customer or customers. Second, the gist of conspiracy is agreement. Thus, 21 if Hudson--assuring, along with News Group, a continuation of wholesaler services--agreed with the 22 publisher and distributor defendants to attempt to eliminate Anderson and Source as wholesalers, 2343 Hudson may be liable under § 1, even if it did not take over any of the business lost by Anderson. 1 Third, although the court emphasized that Hudson coul d not engage in conduct that would "parallel" 2 the conduct of the publishers or the distributors, it is entirely plausible that Hudson had an interest in 3 participating in an endeavor to eliminate A nderson and Source--Hudson's largest competitors--as 4 wholesalers, hoping to gain market share. Indeed, the alleged goal of the conspiracy was to eliminate 5 Anderson and Source in order to divide the whol esale market between News Group and Hudson and 6 give News Group and Hudson exclusive territories--thereby affording retailers no choice as to 7 wholesale supplier (seePart II.C.3.e. below). 8 Fourth, the court's analysis, focusing solelyon the concept of parallelism, disregarded 9 Anderson's factual allegations. They include th e allegation that on or about January 29, 2009, key 10 employees of Curtis, DSI, and TWR, and of Hudson's competitor News Group (all identified by name 11 in the PAC), met at Hudson's offices in North Bergen, New Jersey. Although the PAC did not 12 identify the person or persons attending that meeti ng on behalf of Hudson, it is surely inferable that 13 Hudson was represented, as the meeting was at its offi ces. Further, the fact that the meeting was held 14 after normal business hours lends itself to a plausible inference that the meeting--of two levels of 15 competitors (three distributors and two wholesalers )--was intended to be covert and that its purpose 16 was anticompetitive. 17

e. Publishers' and Distributors' Assumed Self-Interest 18 Finally, we note the district court's view that Anderson's conspiracy claim is not 19 plausible because the elimination of Anderson and Source would be contrary to the publishers' and 20 national distributors' self-interest. The court stated that 21 more wholesalers yields greater competition, which is good for suppliers. 22 Destroying Anderson and Source would reduce the publisher's wholesale 23 outlets from four to two and woul d give Hudson and News Group, the two 2444 remaining major wholesalers, 90% of the market share . . . . This is too much 1 market power to yield to wholesalers. 2 732 F.Supp.2d at 397. We reject this rationale for the dismissal. 3 First, the defendant publishers and distributor s own or control 80 percent of the nation's 4 magazines (seePAC ¶ 80), including, apparently, those that are the most popular (see , e.g. , id

. 5 ¶¶ 11-18). We doubt that it can be said as a matter of law that these publishers and distributors would 6 have less market power than wholesalers who themselves produce no goods and who, without these 7 publishers and distributors, would lack the most popular magazines to offer to retailers. Nor is it 8 implausible that the publishers and distributors would feel comfortable dealing with just two 9 wholesalers, especially given that those wholesalers were members of the alleged conspiracy. 10 Second, the court's self-interest rationale di sregards the allegations that, under the pre11 2009 system, with four national wholesalers compe ting with each other and operating independently 12 of the publishers, the retailers had more wholesal ers from which to choose and could make decisions 13 based on the suppliers' prices. With only two national wholesalers, each with its own allocated 14 territory, many retailers would have no other supplier choice; wholesalers could increase their profits 15 by raising prices to the retailers, and not seek, as Anderson and Source had, to increase charges to the 16 publishers. In the near term at the very least, the conspiracy alleged by Anderson could be expected 17 to benefit the publishers, the distributors, and the two wholesalers who participated. 18 In this connection, we note that the alleged comment by Jacobsen on the elimination 19 of Anderson and Source, stating that "we now contro l this space," was interpreted by the district court 20 as merely describing the state of the industry, 732 F.Supp.2d at 402. It is at least as plausible an 21 interpretation (a) that this statement claiming "control" evinced satisfaction with the reduction of the 22 number of national wholesalers to two, and (b) that the "we" in "we . . . control" referred not only to 23 Jacobsen's TWR and its client Time, but to other publishers and distributors as well. If indeed 2445 Jacobsen said "we" are in control, it hardly seem s possible that the "we" could not have included at 1 least the nation's two largest distributors--Curtis and Kable--and the publishers they represent, i.e. , 2 all of the other publishers in this case. 3

CONCLUSION 4

For the foregoing reasons, we conclude that the district court should have allowed 5 Anderson to file the PAC. We have consideredall of defendants' arguments in support of the 6 judgment and have found them to be without merit. As the district court's dismissal of Anderson's 7 state-law claims was based on its rejection of the Sherman Act claim, we vacate the dismissal of both 8 sets of claims, and remand for further proceedings. We express no view as to the merits of Anderson's 9 claims or as to whether motions for summary judgment will become appropriate. 10 Costs to Anderson. 11