Opinion ID: 626562
Heading Depth: 2
Heading Rank: 2

Heading: Differences Between the Twombly Complaint and Anderson's PAC

Text: With respect to the application in the present case of the plausibility principles set out in Twombly, it is important to bear in mind the nature of the complaint with which the Supreme Court was concerned in Twombly. The Court noted that the question before it was whether a § 1 complaint can survive a motion to dismiss when it alleges that major telecommunications providers engaged in certain parallel conduct unfavorable to competition, absent some factual context suggesting agreement, as distinct from identical, independent action.  550 U.S. at 548-49, 127 S.Ct. 1955 (emphasis added). The Court pointed out that [w]ithout more, parallel conduct does not suggest conspiracy, and a conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality. Hence, when 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 a preceding agreement, not merely parallel conduct that could just as well be independent action. Id. at 556-57, 127 S.Ct. 1955 (emphases added). The complaint at issue in Twombly provided no such context. The claim was that entrenched local telephone companies (the incumbent local exchange carriers or ILECs) violated § 1 by preventing the entry of new carriers into their respective territories. The complaint did not, however, plausibly allege an agreement between or among ILECs; rather, the plaintiffs... proceed[ed] exclusively via allegations of parallel conduct, Twombly, 550 U.S. at 565 n. 11, 127 S.Ct. 1955 (emphasis added). They alleged that the ILECs conspired to restrain trade in two ways: first by engag[ing] in parallel conduct in their respective service areas to inhibit the growth of upstart competitors, id. at 550, 127 S.Ct. 1955 (internal quotation marks omitted); and second by agree[ing] ... to refrain from competing against one another, with such an agreement, `upon information and belief,' simply to be inferred from the ILECs' common failure meaningfully [to] pursu[e] what the plaintiffs characterized as attractive business opportunit[ies] in contiguous markets where they possessed substantial competitive advantages, id. at 551, 127 S.Ct. 1955 (other internal quotation marks omitted) (emphases added). Thus, the thrust of the Twombly complaint was that some illegal agreement may have taken place between unspecified persons at different ILECs (each a multibillion dollar corporation with legions of management level employees) at some point over seven years,  id. at 560 n. 6, 127 S.Ct. 1955 (emphases added), as the complaint merely identif[ied] a 7-year span in which the § 1 violations were supposed to have occurred and  mentioned no specific time, place, or person involved in the alleged conspiracies,  id. at 565 n. 10, 127 S.Ct. 1955 (emphasis added). [N]othing in the [ Twombly ] complaint intimate[d] that the resistance to the upstarts was anything more than the natural, unilateral reaction of each ILEC intent on keeping its regional dominance, id. at 566, 127 S.Ct. 1955; 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 ILECs,  id. at 564, 127 S.Ct. 1955 (emphasis added). Anderson's proposed amended complaint in the present case is vastly different from the complaint at issue in Twombly. Although the district court stated that Anderson claims an economically implausible antitrust conspiracy based on sparse parallel conduct allegations, 732 F.Supp.2d at 402, that Anderson does not place its antitrust conspiracy in a context suggesting a preceding agreement, id., and that the PAC merely add[ed] numerous conclusory allegations that did nothing to cure those perceived defects, id. at 407, the court's criticisms did not accurately characterize the PAC. The PAC alleges actual agreement; it alleges not just that all of the defendants ceased, in virtual lock-step, to deal with Anderson, but alleges that on various dates within the preceding two-week period defendants and News Groupthrough their executives, 10 of whose names or positions are specified had met or communicated with their competitors and others and made statements that may plausibly be interpreted as evincing their agreement to attempt to eliminate Anderson and Source as wholesalers in the single-copy magazine market and to divide that market between News Group and Hudson. The PAC alleges that defendants' meetings and communications began four days after Anderson's January 14 telephone interview with The New Single Copy magazine and included the following: &lhblk; on Sunday January 18, Castardi, Curtis's president, met with Duloc, Kable's president and CEO ( see PAC ¶ 56); &lhblk; Curtis and Kable, competitors whose publisher clients included AMI, Rodale, Hachette, and Bauer, thereafter refused to enter into any legitimate substantive negotiations with Anderson with respect to the Surcharge ( see PAC ¶ 66); &lhblk; on January 22, Kable communicated with its competitor TWR ( see PAC ¶ 57), and on Sunday January 25, Duloc, the president of Kable, and Jacobsen, the president of TWR, scheduled a breakfast meeting for January 29 ( see PAC ¶¶ 56, 62); &lhblk; on or about January 29, after business hours, Hudson hosted a meeting at its offices in North Bergen, New Jersey, attended by its competitor News Group (represented by David Parry) and by key employees of three of the distributor defendants: Dennis Porti of Curtis, John Rafferty of DSI, Michael Cvrlje of TWR ( see PAC ¶ 63 (as amended by Amending Letter at 1)); &lhblk; on Thursday January 29, Curtis sent an e-mail to its publisher clients stating that it was immediately ceasing shipments to Anderson; Curtis clients AMI and Hachette cut off Anderson soon afterward ( see PAC ¶ 66); Kable, on behalf of Bauer, also cut Anderson off from its supply of Bauer's magazines ( see PAC ¶¶ 58, 66); &lhblk; on Monday February 2, TWR, despite Jacobsen's having led Anderson to believe on January 31 that Time would continue to ship magazines to Anderson, cut Anderson off ( see PAC ¶¶ 65, 67-69). In the above-cited paragraphs, the PAC alleged that in those meetings and communications the defendants planned a concerted boycott of Anderson, or Source, or both. Lending support to an inference of such planning, the PAC includes other allegations of communications between defendants and of statements by certain of the defendants to Anderson and Source: &lhblk; Castardi of Curtis and Duloc of Kable suggested to Anderson that Source should be eliminated as a wholesaler and that Anderson could then obviate the need for its Surcharge by simply becoming the publishers' exclusive wholesaler in areas formerly serviced by both Anderson and Source and imposing increased prices on retailers; however, Castardi told Anderson's CEO `you need to let Source go out first' (PAC ¶ 58); &lhblk; when Anderson declined the invitation to join the group planning to eliminate Source, Kable refused to continue to supply Anderson with magazines published by Kable's clients, including Bauer ( see PAC ¶ 58); &lhblk; when Anderson attempted to negotiate with Curtis, Castardi said he, on behalf of AMI, Hachette, and Rodale, would do whatever TWR did; when Anderson's CEO met with TWR's CEO Jacobsen on January 31 and reported Castardi's statement, Jacobsen just nodded, smiled, and crossed his arms ( see PAC ¶ 70). The PAC also alleged that &lhblk; in late January, Kable's president Duloc contacted Comag's president and CEO Sullivan and urged him to have Comag stop shipping to Anderson and/or Source ( see PAC ¶ 59); &lhblk; on January 29, Rodale's vice president Richard Alleger sent an e-mail to Michael Porche, DSI's president and CEO, stating that Comag `will continue to SHIP!' to `BOTH Anco [ i.e., Anderson] and Source,' and that `Sullivan... is dangerous' (PAC ¶ 60); &lhblk; DSI's Porche forwarded Rodale's concerned e-mail to the president of AMI (David Pecker), a Rodale competitor ( see PAC ¶¶ 51, 60); &lhblk; on January 31, Rodale complained to its competitor Bauer about Comag's agreement to continue supplying Source, and Bauer responded that it `[d]oesn't matter[; S]ource won't be around much longer ' (PAC ¶ 61 (emphasis ours)); &lhblk; on January 31, TWR's Jacobsen told Anderson that he was about to inform Source that `as long as I'm at TWR or Ann Moore is at Time, we will never, ever do business with Source again' (PAC ¶ 71); &lhblk; earlier on January 31, Curtis's Castardi had told a Source executive that Castardi  knew, with `100% certainty,' that TWR, Bauer, and AMI would refuse to supply product to Source (PAC ¶ 71 (emphases ours)). In sum, taking the PAC's allegations as to the chronology as true, the presidents of Curtis and Kable met on January 18; Kable and Curtis thereafter refused even to enter into legitimate negotiations with Anderson; Kable contacted TWR on January 22; on January 25, the presidents of Kable and TWR scheduled a breakfast meeting for January 29; on or about January 29, at the offices of Hudson, there was an after-hours meeting whose participants included specified key employees of Curtis, DSI, and TWRas well as News Group, which was to share the wholesale market with Hudson after Anderson and Source were eliminated. On January 31 Bauer told Rodale that Source won't be around much longer, whichconsidering the failure of Curtis, the largest distributor, in its 2008 attempt to terminate Anderson unilaterallywas a reassurance that Bauer could not have given on the basis of any one entity's independent conduct. And on January 31, even before Source was informed by TWR itself that TWR and Time would stop doing business with Source, Curtis's president Castardialthough Curtis did not represent Time and was TWR's competitorhad said he knew, `with 100% certainty' that Source would be cut off by TWR, which represented Time. At the same time, Castardi said he knew with 100% certainty that Bauer which was represented by DSI and Kable but not by Curtiswould cease to supply Source. Thus, within days of Anderson's announcement of its proposed Surcharge, each of the four distributor defendants met or communicated with at least two other distributor defendants; both TWR and Curtis met or spoke with all three other distributor defendants; and Kable spoke with at least two other distributor defendants, as well as with Comag, which Kable attemptedunsuccessfullyto have join the planned boycott of Source and Anderson. Each of the publisher defendants used at least one of the four distributor defendants to manage that publisher's relationships with wholesalers. AMI, Hachette, and Rodale all used both Curtis and DSI as distributors; Bauer used both DSI and Kable as distributors. Rodale and Bauer communicated directly with each other, and Rodale communicated with AMI through DSI. The only two distributors not alleged in the PAC to have communicated directly with each other are DSI and Kable; but at least indirect communication between the two is inferable, given that both of them represented Bauer, and that Bauer on January expressly reassured Rodale that Source would soon be eliminated. The PAC does not include allegations that Time or Hachette met or communicated with other publisher defendants; but it does allege that when the distributors they used said Anderson would be cut off, Time and Hachette promptly cut Anderson off. We note that the PAC indicates that DSI is a subsidiary of AMI and that TWR is a subsidiary of Time; and it is well established that a corporation and its wholly-owned subsidiary are not considered separate entities for purposes of § 1 of the Sherman Act, see American Needle, Inc. v. National Football League, ___ U.S. ___, 130 S.Ct. 2201, 2211-12, 176 L.Ed.2d 947 (2010); Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 771, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984). However, the facts alleged in the PAC are sufficient to suggest that the cessation of shipments to Anderson resulted not from isolated parent-subsidiary agreements but rather from a lattice-work of horizontal and vertical agreements to boycott Anderson. In sum, given the above factual allegations and the reasonable inferences that may be drawn from them, the PAC is sufficient to make Anderson's antitrust claim plausible. The district court's ruling that the PAC contained only conclusory assertions was error, and the court's failure to assume the truth of reasonable inferences that could be drawn from Anderson's allegations, see 732 F.Supp.2d at 402 (on a motion to dismiss, ... factual inferences are not entitled to be take[n]... as true), was likewise error.