Tuesday, October 25, 2011

Bell Atlantic Corp. v. Twombly case brief (127 S.Ct. 1955)

127 S.Ct. 1955 (2007)
Supreme Court of the United States, 2007.

Plaintiff, Twombly, brought a class action antitrust suit against Bell Atlantic alleging the defendants had agreed not to compete with each other and conspired to prevent the entry of competitors within their respective territories. The District Court granted Bell Atlantic’s 12(b)6 motion to dismiss on the grounds that Twombly’s complaint failed to include a factual allegation that would “tend to exclude” independent self-interest as an explanation for defendants’ parallel conduct. On appeal, the Second Circuit reversed and remanded on the grounds that a heightened pleading standard does not apply in the context of antitrust litigation. Bell Atlantic argues that application of the “tend to exclude” standard is necessary to filter frivolous lawsuits. Twombly responds that the “tend to exclude” standard is contrary to the pleading requirements under the Federal Rules of Civil Procedure and would unfairly block meritorious antitrust suits.
-United States District Court (S. NY) dismissed the complaint for failure to state a claim upon which relief can be granted.
-Found Pl.’s allegations of parallel ILEC actions to discourage competition inadequate b/c: “the behavior of each ILEC in resisting the incursion of CLECs is fully explained by the ILEC’s own interests in defending its individual territory.
-Court of Appeals, Second Circuit Reversed - District Court tested complaint by the wrong standard.
-”Plus factors are not required to be pleaded to permit an antitrust claim based on parallel conduct to survive dismissal.
-Supreme Court of the United States grants certiorari to address the proper standard for pleading an antitrust conspiracy through allegations of parallel conduct and now reverses.


Is a complaint alleging that defendants engaged in parallel conduct and that they participated in a "conspiracy" sufficient to state a claim under section 1 of the Sherman act, 15 U.S.C. § 1, even if the complaint does not assert any factual allegations that, if proven true, would necessarily establish the existence of a conspiracy?


Sherman Act § 1-”does not prohibit all unreasonable restraints of trade...but only restraints effected by a contract, combination, or conspiracy.
[What must a Pl. plead in order to state a claim under § 1 of the Sherman act?]
-Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of what the claim is and the grounds upon which it rests.”
-On a motion to dismiss, courts “are not bound to accept as true a legal conclusion couched as a factual allegation.” [A] Factual allegations must be enough to raise a right to relief above the speculative level.
-A well pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and “that a recover is very remote and unlikely.”
-”It is one thing to be cautious before dismissing an antitrust complaint in advance of discovery..but quite another to forget that proceeding to antitrust discovery can be expensive.
“A district court must retain the power to insist some specificity in pleading before allowing a potentially massive factual controversy to proceed.”
[A]The threat of discovery expense will push cost-conscious defendants to settle even anemic cases before reaching those proceedings.


-When we look at the plausibility of this complaint, we agree with the District Court that Pl.’s claim of conspiracy in restraint of trade comes up short.


-Because PL.’s here have not nudged their claims across the line from conceivable to plausable, their complaint must be dismissed.

Outside notes
Reasoning: Complaint must be more than a reasonably founded hope of finding evidence. Plaintiff must show plausibility of a claim to be a proper complaint. How much to you have to say to state a sufficient claim? Conley standard is that it only can be dismissed if no set of proven facts would prove the case. Twombly narrows Conley to say that the complaint must be “plausible” on the stated facts and plaintiff must show some fact that makes it plausible, not just a set of facts that have two possible interpretations. 

link to case:  http://scholar.google.com/scholar_case?case=18057384228100022643&hl=en&as_sdt=2&as_vis=1&oi=scholarr

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  1. Facts of the Case

    William Twombly and other consumers brought a class action lawsuit against Bell Atlantic Corp. and other telecommunications companies. Twombly alleged that the companies had violated Section 1 of the Sherman Act by conspiring to end competition among themselves and to stifle new competition. In the suit, Twombly claimed that the companies had agreed not to branch out into and compete in one another's territories, even though the Telecommunications Act of 1996 might have made it relatively inexpensive to do so.

    The District Court granted Bell Atlantic's motion to dismiss the suit, however, because Twombly had failed to "allege sufficient facts from which a conspiracy can be inferred." In order to sufficiently claim a Section 1 violation, the court held, the plaintiffs needed to establish a "plus factor" - a piece of evidence showing that the defendants' behavior would be against their economic self-interest unless there was a conspiratorial agreement. Twombly had not established a plus factor, the court held, because the companies' defensive behavior could have been motivated by economic factors rather than conspiracy.

    Twombly appealed to the U.S. Court of Appeals for the Second Circuit, which reversed the lower court. The Second Circuit ruled that Twombly needed only to allege a conspiracy and specific facts that would support a Section 1 violation. Since he had alleged that the companies had engaged in suspicious "parallel conduct" and conspired to preserve monopoly conditions, his claim was sufficient and the suit could proceed.

  2. From Wikipedia:

    Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), was a decision of the Supreme Court of the United States involving antitrust law and civil procedure. Authored by Justice David Souter, it established that parallel conduct, absent evidence of agreement, is insufficient to sustain an anti-trust action under § 1 of the Sherman Act. It also heightened the pleading requirement for Federal civil cases, requiring that plaintiffs include enough facts in their complaint to make it plausible — not merely possible or conceivable — that they will be able to prove facts to support their claims. This latter change in the law has been met with a great deal of controversy in legal circles, evidenced by the dissenting opinion from Justice Stevens.

    Twombly and Marcus brought a class-action lawsuit alleging that Bell Atlantic and a number of other large telephone companies had engaged in anti-competitive behavior in violation of § 1 of the Sherman Act. Specifically, the plaintiffs alleged that these large telephone companies had acted in order to disadvantage smaller telephone companies and charge consumers more by, for example, refraining from entering markets where another large company was dominant (thereby preventing a price war).

    Their complaint was dismissed by Judge Gerard E. Lynch of the U.S. District Court for the Southern District of New York, as failing to allege sufficient facts to state a claim for a violation of the Sherman Act. This decision was reversed by the Second Circuit Court of Appeals, and the Supreme Court agreed to hear the case in 2006.

    The Supreme Court reversed the decision of the Second Circuit, which had reversed the decision of the District Court (Lynch D.J.) dismissing the complaint for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure.

    As an initial matter, the Supreme Court clarified the requirements of proving a claim of anti-competitive behavior under Section 1 of the Sherman Act. The Sherman Act prohibits entering into a "contract, combination, or conspiracy" to restrain trade. The Court held that while parallel conduct — actions by competing companies that might be seen as implying some agreement to work together — is "admissible circumstantial evidence" from which an agreement to engage in anti-competitive behavior may be inferred, parallel conduct alone is insufficient to prove a Sherman Act claim.

    The Court then upheld the District Court's dismissal of the plaintiff's complaint, holding that the mere allegations contained in the complaint that the competitors had agreed not to compete were insufficient to state a claim of conspiracy under the Sherman Act. The Court found that Twombly's complaint had not provided enough facts for the court to find it plausible that the companies had engaged in a conspiracy; instead, the complaint provided factual bases for parallel conduct — not enough under the Court's new interpretation of the Sherman Act — and merely stated that an agreement had taken place, with no details to support that allegation. The Court held that the dismissal of the complaint was therefore proper.

    The Court's opinion changed the existing interpretation of the notice pleading requirements of Federal Rule of Civil Procedure 8(a)(2) (and the standards for dismissal under Federal Rule of Civil Procedure 12(b)(6)), creating a new, stricter standard of a pleading's required specificity. Previously, under the standard the Court set forth in Conley v. Gibson, a complaint need only state a "conceivable" set of facts to support its legal claims — that is, that a court could only dismiss a claim if it appeared, beyond a doubt, that the plaintiff would be able to prove no set of facts in support of her claim that would entitle her to relief. In Twombly, the court adopted a more strict, "plausibility" standard, requiring in this case "enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of illegal agreement".

    The general applicability of this heightened standard of pleading outside of antitrust cases was established in Ashcroft v. Iqbal. In this subsequent decision, the Court also provided guidance as to how lower courts should apply the Bell Atlantic Corp. v. Twombly test:

    Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. ... Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. 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. In keeping with these principles a court considering a motion to dismiss can choose to begin by identifying plead­ings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal con­clusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. Our decision in Twombly illustrates the two-pronged approach.

    Attorneys Michael Kellogg and Thomas Barnett argued the case successfully for the petitioners.

  4. Liability under § 1 of the Sherman Act, 15 U.S.C. § 1, requires a "contract, combination. . ., or conspiracy, in restraint of trade or commerce." The question in this putative class action is 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. We hold that such a complaint should be dismissed.


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