550 U.S. 544, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)
In 1984 the divestiture of AT&T's local telephone business created seven regional service monopolies known as Regional Bell Operating Companies or Incumbent Local Exchange Carriers.1 More than a decade later Congress enacted the Telecommunications Act of 1996 which restructured local telephone markets and imposed duties on the ILECs to facilitate entry by competitive local exchange carriers through resale of services at wholesale rates, leasing of unbundled network elements, or interconnection of facilities.2
William Twombly and Lawrence Marcus filed suit in the United States District Court for the Southern District of New York on behalf of a putative class of all subscribers of local telephone and high-speed internet services from February 8, 1996 to the present.3 They named as defendants four consolidated ILECs: BellSouth Corporation, Qwest Communications International Inc., SBC Communications Inc., and Verizon Communications Inc.4
The complaint alleged that these ILECs conspired to restrain trade by engaging in parallel conduct to inhibit CLECs, including unfair agreements for network access, inferior connections, overcharging, and billing practices designed to sabotage CLEC customer relations.5 The complaint further alleged that the ILECs agreed not to compete against one another in their respective territories.6
This agreement was inferred from their common failure to pursue business opportunities in contiguous markets and from a statement by Qwest CEO Richard Notebaert that competing in another ILEC's territory might be a good way to turn a quick dollar but that does not make it right.7 The complaint asserted that in light of the absence of meaningful competition among the ILECs and their parallel course of conduct the defendants had entered into a contract combination or conspiracy to prevent competitive entry and to allocate customers and markets.8
The district court dismissed the complaint for failure to state a claim.9 It concluded that the alleged parallel behavior was fully explained by each ILEC's independent interest in defending its own territory and that the complaint did not allege facts suggesting the decision to refrain from competing elsewhere was contrary to the ILECs' apparent economic interests.10 The Court of Appeals for the Second Circuit reversed, holding that plus factors need not be pleaded and that allegations of parallel conduct suffice if they leave open the possibility of collusion.11
The Supreme Court granted certiorari to address the proper standard for pleading an antitrust conspiracy through allegations of parallel conduct.12
Whether a Section 1 Sherman Act complaint alleging that major telecommunications providers engaged in parallel conduct unfavorable to competition can survive a motion to dismiss absent factual context suggesting agreement rather than independent action?13
Liability under section 1 of the Sherman Act requires a contract, combination, or conspiracy in restraint of trade.14 Parallel business behavior is admissible circumstantial evidence from which a fact finder may infer agreement, but it falls short of conclusively establishing agreement or itself constituting a Sherman Act offense.15 Even conscious parallelism is not in itself unlawful.16 To state a claim, the complaint must include enough factual matter to suggest that an agreement was made, placing parallel conduct in a context that raises a suggestion of preceding agreement.17
No. The complaint filed by William Twombly and Lawrence Marcus on behalf of the putative class alleged that the four ILECs engaged in parallel conduct to inhibit the growth of CLECs through unfair agreements, inferior connections, overcharging, and billing practices.18 It also alleged that they agreed not to compete in each other's territories as inferred from their failure to pursue opportunities in contiguous markets and the statement by Qwest CEO Richard Notebaert.19 These allegations rest on descriptions of parallel conduct without any independent allegation of actual agreement among the ILECs.20 The district court correctly found that the behavior of each ILEC in resisting CLECs is fully explained by its own interest in defending its territory.21
The complaint does not allege facts suggesting that refraining from competing was contrary to their economic interests.22
The complaint does not state a valid claim under section 1 of the Sherman Act and was properly dismissed.23
Related opinions on this issue
Justice Stevens dissented.24 He argued that the parallel conduct alleged is consistent with the presence of the illegal agreement alleged in the complaint.25 Under settled precedent a judge must accept as true all factual allegations contained in the complaint.26
The complaint's straightforward allegation of an agreement should allow the case to proceed at least to require some response from the defendants.27 Stevens emphasized that the majority's plausibility standard is irreconcilable with Rule 8 and prior cases like Swierkiewicz.28 Fear of discovery burdens does not justify dismissing an adequately pleaded complaint.29
Whether the pleading standard under Federal Rule of Civil Procedure 8(a)(2) requires factual allegations that raise a plausible suggestion of conspiracy when a claim rests on parallel conduct?30
Federal Rule of Civil Procedure 8(a)(2) requires a short and plain statement of the claim showing that the pleader is entitled to relief.31 While a complaint does not need detailed factual allegations, it must provide the grounds of entitlement to relief with enough factual matter to raise a right to relief above the speculative level.32 For section 1 claims, an allegation of parallel conduct and a bare assertion of conspiracy will not suffice; the allegations must be placed in a context that raises a suggestion of a preceding agreement.33 The 'no set of facts' language from Conley v. Gibson is best forgotten as it permits conclusory statements to survive dismissal.34
Yes. The complaint's allegations of parallel conduct by the ILECs, even when taken as true, do not raise a plausible suggestion of conspiracy.35 They are just as consistent with independent action prompted by common perceptions of the market.36 The Supreme Court held that stating a section 1 claim requires enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement.37 The plaintiffs here have not nudged their claims across the line from conceivable to plausible.38
A section 1 Sherman Act complaint based on parallel conduct must include factual allegations that plausibly suggest an agreement to survive a motion to dismiss under Rule 12(b)(6).39