Opinion ID: 522307
Heading Depth: 3
Heading Rank: 2

Heading: Horizontal price-fixing.

Text: 16 Cayman's amended complaint alleges the following: Within the industry, there is a common knowledge that concerted action is contemplated and invited for all transmission companies to uniformly breach contracts with producers with an object and purpose of forcing producers to accept lower prices for natural gas; United has adhered to and participated in this price fixing conspiracy which is illegal per se under Section 1 of the Sherman Act. 17 To state a claim of horizontal price-fixing, plaintiff must allege: (1) the existence of an agreement, combination or conspiracy, (2) among actual competitors (i.e., at the same level of distribution), (3) with the purpose or effect of raising, depressing, fixing, pegging, or stabilizing the price of a commodity (4) in interstate or foreign commerce. See Socony-Vacuum Oil Co., 310 U.S. at 216-19, 60 S.Ct. at 841-42; see also National Soc'y of Professional Eng'rs v. United States, 435 U.S. 679, 98 S.Ct. 1355, 55 L.Ed.2d 637 (1978). 18 In the absence of an explicit agreement, conspiratorial conduct may be established by circumstantial evidence. Loew's, Inc. v. Cinema Amusements, Inc., 210 F.2d 86, 93 (10th Cir.), cert. denied, 347 U.S. 976, 74 S.Ct. 787, 98 L.Ed. 1115 (1954). However, even conscious parallel business behavior, standing alone, is insufficient to prove conspiracy. Theatre Enterprises, Inc. v. Paramount Film Distrib. Corp., 346 U.S. 537, 541, 74 S.Ct. 257, 259, 98 L.Ed. 273 (1954). The antitrust plaintiff who relies on a theory of conscious parallelism must establish that defendants engaged in consciously parallel action ... which was contrary to their economic self-interest so as not to amount to good faith business judgment. Pan-Islamic Trade Corp. v. Exxon Corp., 632 F.2d 539, 559 (5th Cir.1980), cert. denied, 454 U.S. 927, 102 S.Ct. 427, 70 L.Ed.2d 236 (1981). Thus, the conspiracy allegation will fail if there is an independent business justification which explains the alleged conspirators' conduct. 19 Cayman did not identify the alleged conspirators, when or how they functioned, or the nature and extent of United's participation in the alleged conspiracy. Moreover, Cayman failed to allege any facts which would support an inference that the alleged actions by gas transmission companies would be contrary to their economic interests absent an agreement. 4 We hold that the district court properly concluded that Cayman's amended complaint did not state a claim of horizontal price-fixing.B. RICO 20 Cayman's amended complaint alleges that United has knowingly sent correspondence and communications through the U.S. mails on more than two occasions with the specific design to assert a false position, known to be false, with the specific intent to compel plaintiff to relieve United of its take-or-pay contract. According to Cayman's complaint, United made misrepresentations and adopted knowingly false positions such as positions of force majeure which have no basis in fact. Cayman also alleged that United (in concert with certain unnamed individuals and companies) conspired to conduct its affairs through and derive income from a pattern of racketeering activity. Cayman asserts that this conduct constitutes mail fraud and a pattern of racketeering activity under RICO. 21 To survive a Rule 12(b)(6) motion, a civil RICO claim must allege (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S.Ct. 3275, 3285, 87 L.Ed.2d 346 (1985) (footnote omitted). The district court determined that Cayman's amended complaint failed to state a claim under RICO because the complaint did not (1) allege the predicate racketeering activity, mail fraud, with particularity under Rule 9(b), Fed.R.Civ.P., or (2) allege sufficient facts of a pattern of racketeering activity. 5 22 Rule 9(b), Fed.R.Civ.P., provides in pertinent part that [i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Every circuit which has examined this issue has found that Rule 9(b) is applicable to RICO predicate acts based on fraud. See Alan Neuman Prods., Inc. v. Albright, 862 F.2d 1388, 1392 (9th Cir.1988); Michaels Bldg. Co. v. Ameritrust Co., 848 F.2d 674 (6th Cir.1988); Durham v. Business Management Assocs., 847 F.2d 1505, 1511-12 (11th Cir.1988); Saporito v. Combustion Eng'g, Inc., 843 F.2d 666, 675 (3d Cir.1988); New England Data Servs. v. Becher, 829 F.2d 286, 289-90 (1st Cir.1987); Bennett v. Berg, 685 F.2d 1053, 1062 (8th Cir.1982), cert. denied, 464 U.S. 1008, 104 S.Ct. 527, 78 L.Ed.2d 710 (1983). Courts have differed, however, concerning the harshness of the outcome when Rule 9(b) is not satisfied. Compare Alan Neuman Prods., Inc. v. Albright, 862 F.2d at 1392 (failure to allege mail fraud with particularity fatal to the RICO cause of action) with Saporito v. Combustion Eng'g, Inc., 843 F.2d at 675 (complaint failed to allege predicate fraud with sufficient particularity but court gave appellants leave to amend); New England Data Servs. v. Becher, 829 F.2d at 289-90 (Rule 9(b) applies but where information is in exclusive control of defendant, trial court must determine whether the claim as presented warrants further discovery and amendment). 23 We recognize that the policy of simplicity in pleadings which underlies the Federal Rules of Civil Procedure requires a court to read Rule 9(b)'s requirements in harmony with Rule 8's call for a short and plain statement of the claim which presents simple, concise, and direct allegations. Fed.R.Civ.P. 8. Nevertheless, we believe that the threat of treble damages and injury to reputation which attend RICO actions justify requiring plaintiff to frame its pleadings in such a way that will give the defendant, and the trial court, clear notice of the factual basis of the predicate acts. We believe this is particularly important in cases where the predicate fraud allegations provide the only link to federal jurisdiction. Thus, we hold that Rule 9(b) requires particularity in pleading RICO mail and wire fraud. 24 We conclude that the district court properly applied Rule 9(b) in evaluating Cayman's RICO complaint. We further hold that the amended complaint did not allege the predicate mail fraud acts with sufficient particularity in order to survive dismissal on this basis. We do not, however, consider dismissal in these types of cases to be a hard and fast rule. The trial court has discretion instead to permit amendment of the defective pleadings if the circumstances warrant it. In this case, we do not believe the court abused its discretion in disallowing further amendments and dismissing the complaint. 25 AFFIRMED.