Deeper Look into Motions to Dismiss in a Post-Twombly and Iqbal Antitrust World

Deeper Look into Motions to Dismiss in a Post-Twombly and Iqbal Antitrust World

by Dennis D. Palmer and Adam K. Fuemmeler


1. Recent Case Law: Applying Twombly To Parallel Conduct Cases

a. Cases In Which The Court Found The Alleged Conspiracy Plausible

Due likely to confusion regarding the plausibility standard set out in Twombly and Iqbal, courts have sought to interpret and clarify its meaning in conscious parallel cases. Several such cases ruled that the complaint contained sufficient additional facts to support a plausible claim of an agreement. For example, in In re Text Messaging Antitrust Litigation, the Seventh Circuit agreed to hear an interlocutory appeal of a district court's decision sustaining the sufficiency of a complaint alleging that leading telecommunications companies conspired to fix the prices for text messages in violation of Section 1 of the Sherman Act. The court in a decision written by Judge Richard Posner, explored the meaning of the plausibility standard set forth in Twombly:

The Court said in Iqbal that the "plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." This is a little unclear because plausibility, probability, and possibility overlap. Probability runs the gamut from a zero likelihood to a certainty. What is impossible has a zero likelihood of occurring and what is plausible has a moderately high likelihood of occurring. The fact that the allegations undergirding a claim could be true is no longer enough to save a complaint from being dismissed; the complaint must establish a nonnegligible probability that the claim is valid; but the probability need not be as great as such terms as "preponderance of the evidence" connote.

The In re Text Messaging court found that plaintiffs alleged a conspiracy with sufficient plausibility to satisfy the Twombly pleading standard, pointing to several allegations that were indicative, if true, of a plausibly asserted conspiracy rather than merely parallel conduct. The court referenced three alleged "plus factors" that led them to its decision: (1) the defendants met in small groups and exchanged price information directly at trade association meetings; (2) the defendants allegedly increased prices just as costs were falling steeply; and (3) the defendants abruptly changed from complex and heterogeneous pricing structures to a uniform pricing structure at the same time that they raised prices significantly. In arriving at its finding, the court recognized that while "[d]iscovery may reveal the smoking gun or bring to light additional circumstantial evidence that further tilts the balance in favor of liability," that plaintiffs had sufficiently alleged a plausible conspiracy.

Also, in Starr v. Sony BMG Music Entertainment, plaintiffs, who were purchasers of digital music, brought actions in several state and federal courts alleging that defendants had agreed to fix the price of digital music in violation of Section 1 of the Sherman Act. The Second Circuit concluded that plaintiffs had sufficiently alleged Section 1 conspiracy against the defendants. In reaching its conclusion, the court held that the "present complaint succeeds where Twombly's failed because the complaint alleges specific facts sufficient to plausibly suggest that the parallel conduct alleged was the result of an agreement among the defendants." The court determined that the defendants parallel pricing conduct coupled the alleged plus factors, including that: (1) defendants held over 80 percent share of the market, (2) the act could not be profitable absent some agreement, (3) the CEO of one of the defendants suggested that the service his company participated in was formed for the purpose of stopping the "continuing devaluation of music," (4) defendants' attempted to hide their Most Favored Nation clauses because they knew they would attract antitrust scrutiny, (5) defendants charged a price much above that of its closest rival and (6) defendants price-fixing was the subject of a pending government investigation, were sufficient to allege a plausible conspiracy. [footnotes omitted]

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Dennis D. Palmer is a shareholder at Polsinelli Shughart PC and his practice focuses on business litigation including antitrust.

Adam K. Fuemmeler is an associate at Polsinelli Shughart PC and is practicing in business litigation.