The Second Circuit's Anderson News Opinion Misconstrues the Pleading Standard Required by Bell Atlantic Corp. v. Twombly

by Michael G. Cecchini

In April 2012, the Second Circuit reversed the opinion to dismiss plaintiffs' antitrust complaint in Anderson News, L.L.C. v. American Media, Inc. With this ruling, the Second Circuit again demonstrated its willingness to overturn its district courts and allow antitrust complaints to proceed despite those district courts' well-considered rulings that plaintiffs had not adequately pleaded facially plausible antitrust claims as required by Twombly.

Excerpt:

Introduction

The Second Circuit has again demonstrated its willingness to overturn its district courts and allow antitrust complaints to proceed despite those district courts' well-considered rulings that plaintiffs had not adequately pleaded facially plausible antitrust claims as required by Twombly. On April 3, 2012, a panel of the United States Court of Appeals for the Second Circuit reversed the opinion and order of Judge Paul A. Crotty of the Southern District of New York to dismiss plaintiffs' antitrust complaint in Anderson News, L.L.C. v. American Media, Inc. ("Anderson News"). The district court found that the plaintiff magazine wholesaler's original and proposed amended complaints failed to allege facts plausibly suggesting conscious parallel conduct among defendant magazine publishers and distributors, and also failed to place the parallel conduct allegations in a context plausibly suggesting collusion. Judge Crotty held that plaintiffs' allegations failed under the pleading standards established by the Supreme Court in Twombly, as clarified in Iqbal, because they amounted to nothing more than the recitation of conclusory facts of parallel conduct, and were belied by plaintiff's other allegations suggesting that the Defendants had not acted in concert pursuant to any preexisting agreement. The Second Circuit, however, reversed Judge Crotty's decision and determined that even if the original complaint did not meet the requirements set out in Twombly, the proposed amended complaint did so and should have been allowed.

Anderson News is the latest example of the Second Circuit misapplying the more stringent Twombly pleading standards. The opinion creates unnecessary uncertainty for antitrust pleading standards, and it appears to gloss over the Supreme Court's statements in Twombly that allegations of parallel conduct (and even conscious parallelism) in reaction to a common stimulus are insufficient to plead Section 1 Sherman Act claims.

The Twombly Pleading Standard & The Second Circuit

In 2007, the Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)-a case which reached the Supreme Court after the Second Circuit improperly overturned a trial court's order of dismissal-provided guidance on the pleading standard required at the motion to dismiss stage for claims under Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. The Supreme Court held in Twombly that a Section 1 plaintiff must plead "more than labels and conclusions" or facts "merely consistent with" a defendant's liability, and instead must allege enough facts to show that the claim to relief "is plausible on its face." Id. at 555, 557, 570. The Twombly decision thus effectively rejected the former and much less rigorous "no set of facts" standard first enunciated in Conley v. Gibson, 355 U.S. 41, 45-46 (1957). The Court subsequently elaborated on the requirements of this heightened pleading standard: "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged, but it has not 'show[n] ... that the pleader is entitled to relief.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009) (quoting Fed. R. Civ. P. 8(a)(2)). Thus, "[d]etermining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. In developing this standard, the Court was cognizant of a practical policy issue, specifically, avoiding the "potentially enormous expense of discovery" in cases unlikely to yield evidence of a viable Section 1 claim. Twombly, 550 U.S. at 558-59.

Lexis.com subscribers can access enhanced versions of the opinions and annotated versions of the statutes cited in this article:

Anderson News, L.L.C. v. American Media, Inc., 2012 U.S. App. LEXIS 6715 (2012)

Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)

15 U.S.C. § 1

Conley v. Gibson, 355 U.S. 41 (1957)

Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009)

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Michael Cecchini is an associate in the San Francisco office of Gibson, Dunn & Crutcher. He is a member of the firm's Litigation Department. Mr. Cecchini's practice includes general business litigation, antitrust, securities, and white collar defense. Prior to joining the firm, Mr. Cecchini clerked for the Honorable Patricia D. Steele of the Superi