Bell Atlantic Corp. v. Twombly
550 U.S. ____, 127 S. Ct. 1955 (2007)
Facts:
- The 1984 divestiture of AT&T divided it into local ILECs.
- The ILECs’ monopolies were ended with the Telecommunications Act of 1996, which authorized ILECs to enter the long distance market in exchange for its duties to facilitate market entry for CLECs
Procedural History:
- United States District Court for the Southern District of New York dismissed the complaint for failure to state a claim upon which relief can be granted.
- Court of Appeals for the Second Circuit reversed, holding that the District Court tested the complaint by the wrong standard.
Reversed
Contentions of parties:
_Plaintiffs: ILECs violated § 1 of the Sherman Act
- ILECs “engaged in parallel conduct” in their respective service areas to inhibit the growth of upstart CLECs
- Agreements by the ILECs to refrain from competing against one another
Issue:
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.
What a plaintiff must plead in order to state a claim under § 1 of the Sherman Act in accordance with Federal Rule of Civil Procedure Rule 8.
Holding:
In applying these general standards to a § 1 claim, we hold that stating such a claim requires a complaint with enough factual matter (taken as true) to suggest that an agreement was made. Asking 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.
Rule:
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.
Rule 8 should not be read as literally as in Conley, but rather the complaint must contain direct or inferential allegations proving that recovery can be obtained under some legal theory.
Rule of Law:
Telecommunications Act of 1996:
- 1 of the Sherman Act, 15 U. S. C. § 1
- 1. Trusts, etc., in restraint of trade illegal; penalty
Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.
Rule 8
Conley v. Gibson, 355 U. S. 41, 47 (1957) 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,”
Conley v. Gibson spoke not only of the need for fair notice of the grounds for entitlement to relief but of “the accepted rule that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” 355 U.S., at 45-46.
Reasoning:
* Conscious parallelism is not unlawful on its own because parallel conduct is just as compatible with conspiracy as it is with normal business practices. It is therefore neutral when it comes to Rule 8 pleading.
* Proof of a § 1 conspiracy must include evidence tending to exclude the possibility of independent action, see Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752 (1984);
* 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 “entitle[ment] to relief.” Cf. DM Research, Inc. v. College of Am. Pathologists, 170 F.3d 53, 56 (C.A.1 1999)
* We alluded to the practical significance of the Rule 8 entitlement requirement in Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005), when we explained that something beyond the mere possibility of loss causation must be alleged, lest a plaintiff with “‘a largely groundless claim’” be allowed to “‘take up the time of a number of other people, with the right to do so representing an in terrorem increment of the settlement value.’
* Discovery in an antitrust proceeding is very expensive and this practical interest is very important.
* the statement in Conley v. Gibson “a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief” should not be taken so literally. Other courts have applied Conley in a less literal way: “[i]n practice, a complaint . . . must contain either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory” Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1155 (9th Cir. 1989).
* In this case as o plaintiff’s allegation (1): the complaint leaves no doubt that plaintiffs rest their § 1 claim on descriptions of parallel conduct and not on any independent allegation of actual agreement among the ILECs.
* Allegation (2): As to the ILECs’ supposed agreement to disobey the 1996 Act and thwart the CLECs’ attempts to compete, we agree with the District Court that nothing in the complaint intimates that the resistance to the upstarts was anything more than the natural, unilateral reaction of each ILEC intent on keeping its regional dominance
Court’s Order:
Reversed
lasesana 