It is not exactly “breaking news” that in Bell Atlantic v. Twombly, 550 U.S. 544, 577 (2007) the Supreme Court held that a complaint may be dismissed if it does not allege “enough facts to state a claim to relief that is plausible on its face.” In the aftermath of Twombly it became more difficult for plaintiffs to sustain pleadings that relied on reasonable inferences of collusion from parallel conduct. Lower courts took to heart the policy concern expressed in Twombly that the enormous cost of private antitrust litigation could cause defendants to settle non-meritorious suits simply to avoid the expense of litigation. [Also, the threat of frivolous suits that are simply too costly to defend would put a chill on pro-competitive conduct]. But, Twombly has not been the death knell of private antitrust actions. The Supreme Court has also recognized that Congress drafted the antitrust laws with the express purpose of encouraging private enforcement. See Reiter v. Sonone Corp., 442 U.S. 330, 344 (1979). And as the Sixth Circuit has noted, “Rational people, after all, do not conspire in the open, and a plaintiff is very unlikely to have factual information that would exclude the possibility of non-conspiratorial explanation before discovery.” Erie County, Ohio v. Morton Salt, 702 F. 3d 860, 869 (2012) (emphasis in original). These policy interests compete as courts weigh on a case-by-case basis whether plaintiffs have “nudged their claims across the line from conceivable to plausible.” But, it seems it may be easier to budge the judge on the nudge as time has passed from the Twombly decision.
Resetting the Plausibility Standard
Recent circuit court decisions have reaffirmed that there is a crucial difference between the standards for a motion to dismiss and summary judgment. In Erie County, Ohio, the Sixth Circuit discussed the correct standard of review for a motion to dismiss, directing lower courts to “ distinguish motions to dismiss from summary judgment in the antitrust context.” Id. at 867. The circuit court upheld the dismissal of the price fixing suit but noted that the district court had incorrectly applied the standards applicable on summary judgment to a motion to dismiss. The Court offered two important points of clarification:
First, at the pleading stage, the plaintiff is not required to allege facts showing that an unlawful agreement is more likely than lawful parallel conduct. * * *Second, in order to state a Section One claim, a plaintiff need not allege a fact pattern that “tends to exclude the possibility” of lawful, independent conduct. Id. at 868-869.
The Court noted that the “Supreme Court took pains to stress in both Twombly and Iqbal that what is required at the pleading stage is a plausible, not probable, entitlement to relief.” Erie County, Ohio, 702 F.3d at 868. See also, Anderson News LLC et al. v. American Media Inc., 680 F.3d 162, 185 (2d Cir. 2012) (Plaintiffs’ inference does not have to be more plausible than the Defendants’ inference; it just has to be a plausible inference of agreement); and In re Text Messaging Antitrust Litig., 630 F.3d 622, 629 (7th Cir. 2010)(plausible means only a non-negligible chance that an agreement was made).
A Brief Look at Three Very Recent Cases
In the last two weeks there have been at least three district court decisions that dealt with Twombly issues in an antitrust case.
- Korean Noodles: Fenerjian, et al. v. Nongshim Company, Ltd., Case No. 13-cv-04115, (N.D. Cal. Nov. 4, 2014)
This class action was filed after the Korean Fair Trade Commission (“KFTC”) entered an order finding that Korean noodle makers had fixed the price of Korean noodles. The district court denied a motion to dismiss on Twombly grounds stating “plaintiffs have plausibly pleaded that the conspiracy to raise prices in Korea also related to Korean Noodles imported to, and sold in, the United States.” The court noted that “whether plaintiffs can actually prove these allegations, even if improbable, is a separate matter not before me at this stage” (citing Twombly, “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable”). Plaintiffs based their case on a finding by the KFTC that Korean noodle makers had fixed the price of all noodles made in Korea. The court noted that the conspiracy described in the KFTC Order does not by itself support a claim for an alleged conspiracy to raise the prices of Korean Noodles sold in the United States, but it also could not be ignored. Plaintiffs alleged that the conspirators identified by the KFTC sold the same price fixed noodles in the United States through their controlled American counterparts and that the prices did in fact increase in the United States in correlation to the unlawful price increase in Korea. The court concluded, “In doing so, plaintiffs have “nudged their clams across the line from conceivable to plausible.’” The court made this finding despite the fact that the KFTC subsequently stated that it “determined that exported products [e.g., products shipped to the United States] were not subject to price-fixing.”
The Court, however, also applied the plausibility standard to allegations necessary to support other elements of the offense. The court noted, “the question remains whether plaintiffs have sufficiently pleaded that each defendant was a member of the conspiracy. “To establish that a defendant is a member of a conspiracy, a plaintiff must “include allegations specific to each defendant alleging that defendant’s role in the alleged conspiracy, and must make allegations that plausibly suggest that each Defendant participated in the conspiracy.” The court concluded that plaintiffs had not plausibly pleaded that all of the American distributors were controlled by their purported Korean counterparts or that all of defendants’ Korean Noodles in fact increased in price in the United States. Based on this “plausibility” failure some defendants were dismissed from the case with leave to amend.
- Mineral Leases: TenEyck Mineral Trust v. Chesapeake Energy Corporation et al., Case 1:14-cv-0020, (W.D. Mich. Nov. 4, 2014)
Plaintiff, the TenEyck Mineral trust, alleged that the defendants entered into an agreement to depress prices for mineral rights in northern Michigan, and that Chesapeake’s leasing agent, defendant Silver Lake Energy, LLC (Silver Lake), furthered the collusive scheme. The Court did not recount factual allegations in its decision, but one issue was whether the defendants Silver Lake should remain in the case. The district court noted the Supreme Court has cautioned that, because proof of antitrust is typically in the hands of the conspirators, dismissals prior to discovery should be granted very sparingly, citing Hosp. Bldg. Co. v. Trs. of the Rex Hosp., 425 U.S. 738, 746 (1976). But the court also recognized, that “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” citing, Twombly, 550 U.S. at 546. Weighing the competing concerns, the court left Silver Lake in the case, noting that unlike the situation in Twombly, “there will be a minimum added expense to keep Silver Lake in this case to conduct discovery into Silver Lake’s knowledge and role in the alleged conspiracy.”
- Solar Panels: Energy Conversion Devices Liquidation v. Trina Solar Limited et al., Case No. 13-14241, (E.D. Mich. October 31, 2014)
Plaintiff alleged a per se violation of § 1 of the Sherman Act by defendants who allegedly engaged in a conspiracy “to fix prices [of solar panels] at unreasonably low and/or predatory levels and to dump product.” The court applied the Twombly standard to whether the plaintiffs had standing to bring the suit. The court rejected the plaintiffs contention that because they alleged a per se violation, there was no need for plaintiffs to allege antitrust injury. “We . . . reject respondent’s suggestion that no antitrust injury need be shown where a per se violation is involved. The per se rule is a method of determining whether § 1 of the Sherman Act has been violated, but it does not indicate whether a private plaintiff has suffered antitrust injury . . . .” The Court then noted that in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 222-24 (1993), the Supreme Court set forth two prerequisites for a plaintiff to recover on a claim for predatory pricing under § 2 of the Sherman Act: a plaintiff must show that (1) “the prices complained of are below an appropriate measure of its rival’s costs” and (2) “the competitor had . . . a dangerous probability of recouping its investment in below-cost prices.”
The district court found that the plaintiffs in the solar case did not plausibly allege that the defendants had a reasonable probability of recouping their investment in below cost pricing.  The court noted that in the complaint the plaintiffs stated “many solar companies, including Defendants, recently entered the solar panel industry in the past ten to fifteen years.” From this the court concluded that the ability of “many” companies to enter the market in recent years made it implausible that defendants would be able to recoup their alleged losses. In dismissing the complaint the court held that “even if recoupment were economically feasible, the complaint does not plausibly allege that there is “a dangerous probability of recoup[ment].”
A Few Takeaways.
Plaintiffs are finding courts more receptive to argument that their allegations have pushed the complaint from conceivable to plausible. Courts are taking a more holistic view of the allegations and recognizing that just because each allegation on its own does not make the claim plausible, when viewed together as a cohesive story, the plausibility standard may be met. But, courts are also mindful that plausibility applies not just to whether there was an agreement, but each element of the offense, such as standing, whether a particular defendant was a member of the scheme, FTAIA requirements, and other issues.
This is a continually evolving, though fact specific, area. Another blog I recommend where this issue has been examined is The Antitrust Attorney Blog, “The Antitrust Pleading Standard is Shifting Back Towards the Plaintiff.”
Thanks for reading.
 I am sorry but don’t have the ability to provide links to these court cases.
 In Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 222- 24 (1993), the Supreme Court set forth two prerequisites for a plaintiff to recover on a claim for predatory pricing under § 2 of the Sherman Act: a plaintiff must show that (1) “the prices complained of are below an appropriate measure of its rival’s costs” and (2) “the competitor had . . . a dangerous probability of recouping its investment in below-cost prices.” Id. at 222-24. The Court explained that below-cost pricing without recoupment—“unsuccessful predation”—would generally be a boon to consumers: Recoupment is the ultimate object of an unlawful predatory pricing scheme; it is the means by which a predator profits from predation. Without it, predatory pricing produces lower aggregate prices in the market, and consumer welfare is enhanced. Although unsuccessful predatory pricing may encourage some inefficient substitution toward the product being sold at less than its cost, unsuccessful predation is in general a boon to consumers. Brooke Group, 509 U.S. at 224.