Opinion ID: 903587
Heading Depth: 3
Heading Rank: 1

Heading: Alleging Agreement at the Pleadings Stage

Text: Section 1 of the Sherman Act does not prohibit all unreasonable restraints of trade, but only restraints effected by a contract, combination or conspiracy. Twombly, 550 U.S. at 553 (quoting Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 775 (1984)). In evaluating whether a restraint is effected by such a combination or conspiracy in violation of § 1, '[t]he crucial question' is whether the challenged anticompetitive conduct 'stem[s] from [an] independent decision or from an agreement, tacit -20- or express.' Id. (quoting Theatre Enters., Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537, 540 (1954)). An agreement may be found when the conspirators had 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 (internal quotation marks and citation omitted). In the context of § 1 refusal-to-deal or boycott claims, joint or concerted action must be sufficiently alleged since [a] manufacturer . . . generally has a right to deal, or refuse to deal, with whomever it likes, as long as it does so independently. Monsanto Co. v. Spray-Rite Serv. Corp., 465 U.S. 752, 761 (1984); Kartell v. Blue Shield, 749 F.2d 922, 932 (1st Cir. 1984). In alleging conspiracy, an antitrust plaintiff may present either direct or circumstantial evidence of defendants' conscious commitment to a common scheme designed to achieve an unlawful objective. Monsanto, 465 U.S. at 764 (citation and internal quotation marks omitted). Since this appeal concerns dismissal at the pleadings stage, we need not concern ourselves with the evidentiary sufficiency of Evergreen's antitrust claims on the merits. Cf. Rodríguez-Reyes v. Molina-Rodríguez, 711 F.3d 49, 54 (1st Cir. 2013) (stating, in the discrimination context, that [t]he prima facie standard is an evidentiary standard, not a pleading standard, and there is no need to set forth a detailed evidentiary proffer in a complaint.). Rather, we focus on the applicable standard for -21- pleading a plausible refusal-to-deal claim. Specifically, we concentrate on the requirements for sufficiently pleading an agreement under § 1 following Twombly's injunction that [a] statement of parallel conduct, even conduct consciously undertaken, needs some setting suggesting the agreement necessary to make out a § 1 claim; without that further circumstance pointing toward a meeting of the minds, an account of a defendant's commercial efforts stays in neutral territory. An allegation of parallel conduct is thus much like a naked assertion of conspiracy in a § 1 complaint: it gets the complaint close to stating a claim, but without some further factual enhancement it stops short of the line between possibility and plausibility of entitlement to relief. Twombly, 550 U.S. at 557 (internal quotation marks omitted). Courts have evaluated the line between merely alleging parallel conduct and alleging plausible agreement on a case-by-case basis after Twombly, and that process has elicited considerable confusion among the lower courts as to how much of a setting is required to sufficiently contextualize an agreement in the absence of direct evidence. Compare Anderson News, 680 F.3d 162, 189 (finding sufficient allegations to support a plausible refusal-todeal claim), with Burtch v. Milberg Factors, Inc., 662 F.3d 212, 230 (3d Cir. 2011) (finding the plaintiff did not show plausibility of agreement to restrain trade through circumstantial evidence); see also In re Text Messaging Antitrust Litig., 630 F.3d 622, 624 (7th Cir. 2010) (district court certifying for interlocutory appeal the question of an antitrust complaint's adequacy because while -22- the Seventh Circuit had issued dozens of decisions concerning the application of Twombly, the contours of the Supreme Court's ruling, and particularly its application in the present context, remain unclear.); Robert G. Bone, Twombly, Pleading Rules, and the Regulation of Court Access, 94 Iowa L. Rev. 873, 881 (2010) (The [Supreme] Court's criticism of Conley has caused a great deal of confusion . . . [in] determining exactly how the plausibility standard changes previous Rule 8(a)(2) pleading law . . . . 'Plausible' corresponds to a probability greater than 'possible.' Exactly how much greater is uncertain.). The slow influx of unreasonably high pleading requirements at the earliest stages of antitrust litigation has in part resulted from citations to case law evaluating antitrust claims at the summary judgment and posttrial stages, as the district court has done here. See, e.g., In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 323 n.21 (3d Cir. 2010) (Although Twombly's articulation of the pleading standard for § 1 cases draws from summary judgment jurisprudence, the standards applicable to Rule 12(b)(6) and Rule 56 motions remain distinct.). It is thus imperative that we correct this confusion and clarify the proper pleading requirements for sufficiently alleging agreement in § 1 complaints. The Supreme Court in Twombly has offered some guidance as to how to properly plead agreement: a conclusory allegation of agreement at some unidentified point does not supply facts -23- adequate to show illegality . . . . [W]hen allegations of parallel conduct are set out in order to make a § 1 claim, they must be placed in a context that raises a suggestion of preceding agreement, not merely parallel conduct that could just as well be independent action. Twombly, 550 U.S. at 556-57. The Court affirmed the dismissal of plaintiffs' complaint because it proceeded exclusively via allegations of parallel conduct. Id. at 565 n.11 (emphasis added). Specifically, the complaint alleged (1) that defendants engaged in parallel conduct in their respective service areas to inhibit the growth of upstart competitors, id. at 550; and (2) that defendants collectively failed to meaningfully pursue attractive business opportunit[ies] in contiguous markets where they possessed substantial competitive advantages, id. at 551 (internal quotation marks omitted). Additionally, the complaint offered no specific time, place or person involved in the alleged conspiracy, id. at 565 n.10, alleging only that some illegal agreement may have taken place between unspecified persons at different [Incumbent Local Exchange Carriers] . . . at some point over seven years, id. at 560 n.6. Thus, according to the Court, the complaint le[ft] no doubt that plaintiffs rest[ed] their § 1 claim on descriptions of parallel conduct and not on any independent allegation of actual agreement among the [defendants]. Id. at 564. -24- In a footnote, the Court referred to commentators' examples of the type of evidence that may indicate collusion: parallel behavior that would probably not result from chance, coincidence, independent responses to common stimuli, or mere interdependence unaided by an advance understanding among the parties . . . [;] conduct [that] indicates the sort of restricted freedom of action and sense of obligation that one generally associates with agreement. Id. at 557 n.4 (citations omitted). These types of facts have been characterized as parallel plus or plus factors. See, e.g., In re Text Messaging, 630 F.3d at 628; In re Ins. Brokerage, 618 F.3d at 321-22; Nelson v. Pilkington PLC (In re Flat Glass Antitrust Litig.), 385 F.3d 350, 360 (3d Cir. 2004); Petruzzi's IGA Supermarkets v. Darling-Delaware Co., 998 F.2d 1224, 1242 (3d Cir. 1993). Twombly also clarified that [a]sking for plausible grounds to infer an agreement does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement. 550 U.S. at 556. It is not for the court to decide, at the pleading stage, which inferences are more plausible than other competing inferences, since those questions are properly left to the factfinder. See Monsanto, 465 U.S. at 766 n.11 (the meaning of documents that are subject to divergent reasonable . . . interpret[ations] either as referring -25- to an agreement or understanding that distributors and retailers would maintain prices or instead as referring to unilateral and independent actions, is properly . . . left to the jury); id. at 767 n.12 (The choice between two reasonable interpretations . . . of testimony properly [i]s left for the jury.). At these early stages in the litigation, the court has no substantiated basis in the record to credit a defendant's counterallegations. Instead, we may at this early stage only accept as true all factual allegations contained in a complaint, make all reasonable inferences in favor of the plaintiff, and properly refrain from any conjecture as to whether conspiracy allegations may prove deficient at the summary judgment or later stages. Twombly, 550 U.S. at 555-56 (Rule 12(b)(6) does not countenance . . . dismissals based on a judge's disbelief of a complaint's factual allegations. (internal quotation marks omitted)); Anderson, 680 F.3d at 185 (A court ruling on . . . a [Rule 12(b)(6)] motion may not properly dismiss a complaint that states a plausible version of the events merely because the court finds a different version more plausible.). In fact, a well-pleaded complaint may proceed if it strikes a savvy judge that actual proof of the facts alleged is improbable, and that a recovery is very remote and unlikely. Twombly, 550 U.S. at 556 (internal quotation marks omitted). The Second Circuit's recent elucidation of Twombly's plausibility test in § 1 conspiracy cases is illuminating. See -26- Anderson News, 680 F.3d at 189-90. In Anderson News, the court reviewed a district court's dismissal of a bankrupt magazine wholesaler's § 1 refusal-to-deal claim, finding error where the plaintiff's factual allegations and reasonable inferences were sufficiently plausible to survive a Rule 12(b)(6) motion to dismiss. Id. at 189. The court clarified the proper application of Twombly's plausibility requirement, stating: The question at the pleading stage is not whether there is a plausible alternative to the plaintiff's theory; the question is whether there are sufficient factual allegations to make the complaint's claim plausible. . . . [T]here may . . . be more than one plausible interpretation of the defendant's words, gestures, or conduct. Consequently, although an innocuous interpretation of the defendants' conduct may be plausible, that does not mean that the plaintiff's allegation that that conduct was culpable is not also plausible. . . . [O]n a Rule 12(b)(6) motion it is not the province of the court to dismiss the complaint on the basis of the court's choice among plausible alternatives. Assuming that [plaintiff] can adduce sufficient evidence to support its factual allegations, the choice between or among plausible interpretations of the evidence will be a task for the factfinder. Id. at 189-90 (citations omitted and emphasis added). Pleading requirements are thus starkly distinguished from what would be required at later litigation stages under Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574 (1986), or at trial under Monsanto, 465 U.S. at 768, and Theatre Enterprises, 346 U.S. at 540-41: to present a plausible claim at the pleading -27- stage, the plaintiff need not show that its allegations suggesting an agreement are more likely than not true or that they rule out the possibility of independent action. Anderson News, 680 F.3d at 184; see also Watson Carpet & Floor Covering, Inc. v. Mohawk Indus., 648 F.3d 452, 458 (6th Cir. 2011) (Often, defendants' conduct has several plausible explanations. Ferreting out the most likely reason for the defendants' actions is not appropriate at the pleadings stage.). Twombly is therefore clear that, if no direct evidence of agreement is alleged, it is insufficient to exclusively allege parallel conduct at the pleadings stage. Rather, a complaint must at least allege the general contours of when an agreement was made, supporting those allegations with a context that tends to make said agreement plausible. Many courts have referenced plus factors in analyzing the plausibility of § 1 claims at the pleadings stage, but those references have invariably been drawn from cases evaluating the merits of an antitrust plaintiff's conspiracy claim at the summary judgment and trial stages of litigation, when there is significantly more information available regarding whether complex analyses of pricing structures and other information suggest agreement. See, e.g., In re Ins. Brokerage, 618 F.3d at 321-22 (relying on Flat Glass, 385 F.3d at 359-60, which explains that plus factors are proxies for direct evidence of an agreement). However, we have made clear that [p]laintiffs must -28- establish that it is plausible that defendants are engaged in more than mere conscious parallelism, by pleading and later producing evidence pointing toward conspiracy, sometimes referred to as 'plus factors.' White v. R.M. Packer Co., 635 F.3d 571, 577 (1st Cir. 2011) (emphasis added). This is not to say that a § 1 conspiracy may not be made more plausible by bolstering factual allegations of parallel conduct with appropriate plus factors; it is merely to highlight the distinction between pleading a plausible § 1 claim and the much later requirement of producing plus factor evidence pointing towards conspiracy.3 We are thus wary of placing too much significance on the presence or absence of plus factors at the pleadings stage. While they are certainly helpful in guiding a court in its assessment of the plausibility of agreement in a § 1 case, other, more general allegations informing the context of an agreement may be sufficient. This is particularly true given the increasing 3 We also note that footnote 4 in Twombly is very broad and suggestive of allegations that may support agreement at the pleadings stage -- conduct that indicates the sort of restricted freedom of action and sense of obligation that one generally associates with agreement -- and the Court explicitly rejected a heightened pleading standard in antitrust cases after acknowledging that discovery in antitrust cases can be expensive. 550 U.S. at 558; see id. at 569 n.14 ([W]e do not apply any 'heightened' pleading standard, nor do we seek to broaden the scope of Federal Rule of Civil Procedure 9, which can only be accomplished 'by the process of amending the Federal Rules, and not by judicial interpretation.') (citation omitted); see also West Penn Allegheny Health Sys., Inc. v. UPMC, 627 F.3d 85, 98 (3d Cir. 2010) (rejecting district court's application of a heightened pleading standard in antitrust cases). -29- complexity and expert nature of plus factor evidence which would not likely be available at the beginning stages of litigation. It is also clear that allegations contextualizing agreement need not make any unlawful agreement more likely than independent action nor need they rule out the possibility of independent action at the motion to dismiss stage. Requiring such heightened pleading requirements at the earliest stages of litigation would frustrate the purpose of antitrust legislation and the policies informing it. Radovich v. Nat'l Football League, 352 U.S. 445, 454 (1957) (Congress itself has placed the private antitrust litigant in a most favorable position . . . . In the face of such a policy this Court should not add requirements to burden the private litigant beyond what is specifically set forth by Congress in those laws.); see also Twombly, 550 U.S. at 587 (Stevens, J., dissenting) (It is . . . more, not less, important in antitrust cases to resist the urge to engage in armchair economics at the pleading stage.); Arthur R. Miller, Simplified Pleading, Meaningful Days in Court, and Trials on the Merits: Reflections on the Deformation of Federal Procedure, 88 N.Y.U. L. Rev. 286, 365-66 (2013) (If the procedural rules are not receptive to lawsuits designed to vindicate the objectives of our constitutional and statutory policies, or if cases pursuing that end cannot be lodged in a convenient forum or survive a motion to -30- dismiss, such cases will not be instituted and those policies will not be furthered.).