Opinion ID: 1921
Heading Depth: 3
Heading Rank: 1

Heading: Allegation of an agreement

Text: The District Court found the dismissal of Counts Two through Five warranted in part based on its conclusion that the Plaintiffs did not adequately allege an agreement among Dentsply and the Dealers. The Plaintiffs seek to revive their conspiracy claims essentially by reference to their allegations that every Dealer agreed to the same planDealer Criterion 6; that every Dealer knew that every other Dealer agreed, or would agree, to this same plan; and that it ... was obvious to each Dealer thatonly if all of the other Dealers compliedwould the purpose of Dealer Criterion 6 be achieved. (Appellants' Br. 68-69.) Section 1 claims are limited to combinations, contracts, and conspiracies, and thus always require the existence of an agreement. See In re Ins. Brokerage Antitrust Litig., 579 F.3d 241, 267 (3d Cir.2009). Section 2 claims, in contrast, do not require an agreement except where, as here, the specific charge is conspiracy to monopolize. See Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 767 n. 13, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984). Therefore, the viability of the Plaintiffs' Section 1 and Section 2 claims in Counts Two through Five turns on whether the Plaintiffs have adequately alleged an agreement among Dentsply and the Dealers. See Englert v. City of McKeesport, 872 F.2d 1144, 1150 (3d Cir.1989); Fragale & Sons Beverage Co. v. Dill, 760 F.2d 469, 473-74 (3d Cir.1985). [7] To allege such an agreement between two or more persons or entities, a plaintiff must allege facts plausibly suggesting a unity of purpose or a common design and understanding, or a meeting of minds in an unlawful arrangement. Copperweld, 467 U.S. at 771, 104 S.Ct. 2731 (quotation omitted); see also, e.g., Sunkist Growers, Inc. v. Winckler & Smith Citrus Prods. Co., 370 U.S. 19, 29-30, 82 S.Ct. 1130, 8 L.Ed.2d 305 (1962). The amended complaint in this case alleges a two-tiered conspiracy. First, it alleges that the defendants conspired to maintain Dentsply's monopoly of the manufacture of artificial teeth and/or premium artificial teeth for sale in the United States, to restrain trade for the sale of artificial teeth and/or premium artificial teeth in the United States by the implementation of an exclusive dealing arrangement, and to exclude Dentsply's competitors from the markets for such teeth in the United States[.] (App.435.) Second, it alleges that the defendants conspired to sell such teeth to dental laboratories at anticompetitive prices determined by Dentsply and agreed to by the Dealer Defendants. (Id.) To carry out this conspiracy, Dentsply allegedly has sold teeth to the Dealers on the condition that [the Dealers] restrict their dealings with rival manufacturers[.] (Id. at 452.) The Dealers, the Plaintiffs allege, knew that this exclusive dealing arrangement was and is an illegal restraint of trade designed to maintain Dentsply's monopoly. (Id. at 440.) In our review of the amended complaint, we understand the Plaintiffs to allege a hybrid of both vertical and horizontal conspiracies. ( See, e.g., id. at 435) (Defendants, each with all of the others, have entered into two interrelated conspiracies[.] (emphasis added).) That sort of conspiracy, sometimes dubbed a hub-and-spoke conspiracy, see, e.g., Impro Prods., Inc. v. Herrick, 715 F.2d 1267, 1279 (8th Cir.1983), has a long history in antitrust jurisprudence, see, e.g., Interstate Circuit, Inc. v. United States, 306 U.S. 208, 59 S.Ct. 467, 83 L.Ed. 610 (1939). Such a conspiracy involves a hub, generally the dominant purchaser or supplier in the relevant market, and the spokes, made up of the distributors involved in the conspiracy. The rim of the wheel is the connecting agreements among the horizontal competitors (distributors) that form the spokes. Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 435 n. 3 (6th Cir.2008); see also 2 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application, ¶ 1426, at 188 n. 11 (2d ed.2000); ABA Section of Antitrust Law, Antitrust Law Developments 24 (6th ed.2007). Here, even assuming the Plaintiffs have adequately identified the hub (Dentsply) as well as the spokes (the Dealers), we conclude that the amended complaint lacks any allegation of an agreement among the Dealers themselves. The amended complaint states only in a conclusory manner that all of the defendantsDentsply and all the Dealers includedconspired and knew about the alleged plan to maintain Dentsply's market position. The amended complaint alleges, for instance, that Dentsply made clear to each ... dealer that every other Dentsply dealer was ... required to agree to the same exclusive dealing arrangement, and that every other Dentsply dealer had so agreed. (App. 442.) Iterations of this allegation are sprinkled throughout the amended complaint. ( E.g., id. at 443, 451, 454, 456, 458-59.) But to survive dismissal it does not suffice to simply say that the defendants had knowledge; there must be factual allegations to plausibly suggest as much. See Twombly, 550 U.S. at 564, 127 S.Ct. 1955. There are none here. In other words, the rim connecting the various spokes is missing. Cf. Total Benefits Planning, 552 F.3d at 436; Toys R Us, Inc. v. F.T.C., 221 F.3d 928, 934-36 (7th Cir.2000). Instead of underscoring factual allegations plausibly suggesting the existence of an agreement, the Plaintiffs invite us to infer that the Dealers were aware of each other's involvement in the conspiracy because, as market participants, they all knew that Dentsply was the dominant player in the artificial tooth market and because they all had an economic incentive to create and maintain a regime in which Dentsply reigned and the Dealers did its bidding. In that regime, the Plaintiffs tell us, the Dealers would all benefit from Dentsply's policies because they would all be able to charge dental laboratories artificially inflated prices for teeth in their various regions of operation. We do not disregard the logical appeal of this argument. Certainly, the objective of many antitrust conspiracies is to control pricing with an eye to increasing profits. But simply because each Dealer, on its own, might have been economically motivated to exert efforts to keep Dentsply's business and charge the elevated prices Dentsply imposed does not give rise to a plausible inference of an agreement among the Dealers themselves. Cf. Twombly, 550 U.S. at 566, 127 S.Ct. 1955 (noting the logic of the complaint's allegation of an agreement but finding it insufficient because it did not suggest actual joint action). Notwithstanding Twombly 's requirement that an antitrust plaintiff state enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement[,] id. at 556, 127 S.Ct. 1955 (footnote omitted), the Plaintiffs' allegations do not offer even a gossamer inference of any degree of coordination among the Dealers. Those allegations are not placed in a context that raises a suggestion of a preceding agreement among the Dealers. Id. at 557, 127 S.Ct. 1955. Instead, they do no more than intimate merely parallel conduct that could just as well be independent action. Id. As a consequence, the Plaintiffs have fallen short of their pleading obligations. [8] Before both the District Court and us, the Plaintiffs have tried to hedge their bets. They argue that even if they have not adequately alleged an overarching conspiracy between and among Dentsply and all of its Dealers, they at least have adequately alleged several bilateral, vertical conspiracies between Dentsply and the Dealers. There is arguably some support for what amounts to a rimless conspiracy. See Kotteakos v. United States, 328 U.S. 750, 755, 66 S.Ct. 1239, 90 L.Ed. 1557 (1946); Dickson v. Microsoft Corp., 309 F.3d 193, 203 (4th Cir.2002). However, we need not weigh in on the alternative theory the Plaintiffs now press, for even assuming it is legally viable or even relevant here, the Plaintiffs cannot pursue it under the circumstances of this case because the amended complaint cannot be fairly understood to allege the existence of several unconnected, bilateral, vertical conspiracies between Dentsply and each Dealer. While pleading in the alternative is, of course, authorized by the Federal Rules of Civil Procedure, see Fed.R.Civ.P. 8(a)(3); see also Langer v. Monarch Life Ins. Co., 966 F.2d 786, 802 (3d Cir.1992), we have an obligation to read allegations not in isolation but as a whole and in context, see Chabal v. Reagan, 822 F.2d 349, 357 (3d Cir.1987); Pace Res., Inc. v. Shrewsbury Twp., 808 F.2d 1023, 1026 (3d Cir.1987). As we read the amended complaint, we see no indication of the Plaintiffs' intention to allege that every single agreement between Dentsply and each Dealer had anticompetitive effects. All throughout the amended complaint are substantially similar variations on the allegation that the Defendants have agreed, each with all of the others, to implement an exclusive dealing arrangement[.] (App. 439 (emphasis added).) Indeed, the amended complaint is rife with additional references to the conspiracy between [t]he Defendants,... each with all of the others[.] (E.g., id. at 446, 451 (emphasis added).) These allegations are just not the stuff of several mini-agreements lacking a horizontal tether. In other words, the Plaintiffs simply did not draft their amended complaint to encompass their alternative legal theory. In short, the Plaintiffs are bound by the four corners of their amended complaint, which clearly seeks to allege one conspiracy to which Dentsply and all of the Dealers, as a collective, were parties. To the extent the Plaintiffs are recasting their allegations in an effort to circumvent a motion to dismiss, we must reject that approach. See Leegin Creative Leather Prods. v. PSKS, Inc., 551 U.S. 877, 907-08, 127 S.Ct. 2705, 168 L.Ed.2d 623 (2007); In re New Motor Vehicles Canadian Exp. Antitrust Litig., 533 F.3d 1, 5 (1st Cir. 2008). The Plaintiffs have failed to allege any facts plausibly suggesting a unity of purpose, a common design and understanding, or a meeting of the minds between and among Dentsply and all of the Dealers. Accordingly, we will affirm the District Court's determination that the Plaintiffs have failed to adequately allege the agreement element of their Section 1 and Section 2 claims.