Court Opinion

ID: 9598112
Source: CourtListenerOpinion
Date Created: 2023-08-22 01:05:46.035776+00
Date Added: 2024-06-11T12:31:58.647379
License: Public Domain

JON O. NEWMAN, Circuit Judge,
concurring:
I concur in Judge Katzmann’s comprehensive opinion, but add these additional *328words to explore a perplexing aspect of the Supreme Court’s decision in Bell Atlantic v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). As is well known, the Court there ruled insufficient to survive a motion to dismiss a complaint that endeavored to allege a price-fixing agreement in violation of section 1 of the Sherman Act, 15 U.S.C. § 1. The complaint had relied primarily on an allegation of the defendants’ parallel conduct.
The perplexing aspect of the Court’s opinion is contained in the very first paragraph of the Court’s substantive discussion. The Court there stated:
While a showing of parallel “business behavior is admissible circumstantial evidence from which the fact finder may infer agreement,” it falls short of “conclusively establish[ing] agreement or ... itself constitut[ing] a Sherman Act offense.
Twombly, 550 U.S. at 553, 127 S.Ct. 1955 (emphasis added) (citing Theatre Enterprises v. Paramount Film Distributing Corp., 346 U.S. 537, 540-41, 74 S.Ct. 257, 98 L.Ed. 273 (1954)) (alterations and ellipsis in original).1
If, as the Court states in the first part of this sentence, a fact-finder is entitled to infer agreement from parallel conduct, one may wonder why a complaint alleging such conduct does not survive a motion to dismiss. The answer is surely not supplied by the remainder of the Court’s sentence. That portion states the unexceptional proposition that parallel conduct alone is not conclusive evidence of an agreement to fix prices. To support that proposition, the Court cites Theatre Enterprises. But that case was an appeal by an antitrust plaintiff whose complaint had survived a motion to dismiss. Indeed, that plaintiff had been permitted to present its evidence to a jury, only to have the jury reject on the merits the claim of a section 1 violation. The plaintiff sought review on the ground that the trial court had erred in not granting a motion for a directed verdict in the plaintiffs favor. See Theatre Enterprises, 346 U.S. at 539, 74 S.Ct. 257. The Supreme Court understandably found no error. See id. at 539-42, 74 S.Ct. 257. In Twombly, the Court noted the extraordinary claim that the Theatre Enterprises plaintiff had made. “An antitrust conspiracy plaintiff with evidence showing nothing more than parallel conduct is not entitled to a directed verdict. ” Twombly, 550 U.S. at 554, 127 S.Ct. 1955 (emphasis added).
The fact that an allegation of parallel conduct was held insufficient to require a directed verdict in the plaintiffs favor is hardly a basis for ruling that such an allegation is insufficient to survive a motion to dismiss for failure to state a claim on which relief may be granted.
In view of the Court’s initial observation in Twombly that parallel conduct is sufficient to support a permissible inference of an agreement, the reason for the rejection of the complaint in Twombly must arise from something other than the plaintiffs reliance on parallel conduct. That reason is not difficult to find. It is the context in which the defendants’ parallel conduct occurred. “[Wjhen 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 557, 127 S.Ct. 1955.
The context in Twombly was the aftermath of the divestiture of At & T’s local *329telephone service, resulting in the creation of seven Regional Bell Operating Companies, the so-called “Baby Bells” or Incumbent Local Exchange Carriers (“ILECs”). See id. at 549, 127 S.Ct. 1955. Originally restricted to providing local telephone service, the ILECs were later permitted by the Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56 (Feb. 8, 1996), to enter the long-distance market upon compliance with conditions concerning the opportunity for competitive local exchange carriers (“CLECs”) to make use of an ILEC’s network. See Twombly, 550 U.S. at 549, 127 S.Ct. 1955.
In that context, it was entirely understandable for the Court to cast a jaundiced eye on the claim that the parallel conduct of these newly created ILECs would suffice to permit an inference of agreement. As the Court observed:
[The parallel conduct of the ILECs] was not suggestive of conspiracy, not if history teaches anything. In a traditionally unregulated industry with low barriers to entry, sparse competition among large firms dominating separate geographical segments of the market could very well signify illegal agreement, but here we have an obvious alternative explanation. In the decade preceding the 1996 Act and well before that, monopoly was the norm in telecommunications, not the exception. The ILECs were born in that world, doubtless liked the world the way it was, and surely knew the adage about him who lives by the sword. Hence, a natural explanation for the noncompetition alleged is that the former Government-sanctioned monopolists were sitting tight, expecting their neighbors to do the same thing.
Id. at 567-68,127 S.Ct. 1955.
Two years after Twombly, the Court emphasized its view that whether a bare allegation of illegality would suffice to withstand a motion to dismiss depends on the context in which the allegation is made. “Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Ashcroft v. Iqbal, — U.S. -, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009).
I believe it would be a serious mistake to think that the Court has categorically rejected the availability of an inference of an unlawful section 1 agreement from parallel conduct. Even in those contexts in which an allegation of parallel conduct will not suffice to take an antitrust plaintiffs case to the jury, it will sometimes suffice to overcome a motion to dismiss and permit some discovery, perhaps leaving the issue for later resolution on a motion for summary judgment.
In the pending case, as Judge Katzmann has carefully demonstrated, the context in which the defendants’ alleged parallel conduct occurred, amplified by specific factual allegations making plausible an inference of agreement, suffices to render the allegation of a section 1 violation sufficient to withstand a motion to dismiss.

. The basis for perplexity is not lessened by the Court’s subsequent statement that ’’[i]t makes sense to say, therefore, that an allegation of parallel conduct and a bare assertion of conspiracy will not suffice,” Twombly, 550 U.S. at 556, 127 S.Ct. 1955, apparently meaning will not suffice to defeat a motion to dismiss a complaint.