Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), was a decision of the Supreme Court of the United States involving antitrust law and civil procedure. Authored by Justice David Souter, it established that parallel conduct, absent evidence of agreement, is insufficient to sustain an antitrust action under Section 1 of the Sherman Act. It also heightened the pleading requirement for federal civil cases by requiring for plaintiffs to include enough facts in their complaint to make it plausible, not merely possible or conceivable, that they will be able to prove facts to support their claims. The latter change in the law has been met with a great deal of controversy in legal circles, as evidenced by the dissenting opinion from Justice John Paul Stevens.
Background
William Twombly and Lawrence Marcus brought a class-action lawsuit alleging that Bell Atlantic and the Baby Bells (successor companies to the trust-busted AT&T) had engaged in anti-competitive behavior in violation of Section 1 of the Sherman Antitrust Act. Specifically, the plaintiffs alleged that the companies had acted to disadvantage smaller telephone companies and charge consumers more by, for example, refraining from entering markets where another large company was dominant (thereby preventing a price war), even though the Telecommunications Act of 1996 had made it relatively inexpensive to do so. The lawsuit alleged a conspiracy between the Baby Bells to not compete. As examples, the lawsuit noted that Qwest did not compete in California despite having business in all the surrounding states, and that Verizon did no business in Connecticut despite having a monopoly in all the surrounding states.
Their complaint was dismissed by Judge Gerard E. Lynch of the U.S. District Court for the Southern District of New York, as failing to allege sufficient facts to state a claim for a violation of the Sherman Act. The decision was reversed by the Second Circuit Court of Appeals, and the Supreme Court agreed to hear the case in 2006.
Decision
The Supreme Court reversed the decision of the Second Circuit, which had reversed the decision of the district court (Lynch D.J.) dismissing the complaint for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure.
As an initial matter, the Supreme Court clarified the requirements of proving a claim of anti-competitive behavior under Section 1 of the Sherman Act. The Sherman Act prohibits entering into a "contract, combination, or conspiracy" to restrain trade. The court held that while parallel conduct (actions by competing companies that might be seen as implying some agreement to work together) is "admissible circumstantial evidence" from which an agreement to engage in anti-competitive behavior may be inferred, parallel conduct alone is insufficient to prove a Sherman Act claim.
The court then upheld the district court's dismissal of the plaintiff's complaint, holding that the mere allegations contained in the complaint that the competitors had agreed not to compete were insufficient to state a claim of conspiracy under the Sherman Act. The court found that Twombly's complaint had not provided enough facts for the court to find it plausible that the companies had engaged in a conspiracy; instead, the complaint provided factual bases for parallel conduct, not enough under the court's new interpretation of the Sherman Act, and stated only that an agreement had taken place, with no details to support that allegation. The court held that the dismissal of the complaint was therefore proper.
The decision changed the existing interpretation of the notice pleading requirements of Federal Rule of Civil Procedure 8(a)(2) and the standards for dismissal under Federal Rule of Civil Procedure 12(b)(6) by creating a new, stricter standard of a pleading's required specificity.
Previously, under the standard the court set forth in Conley v. Gibson, a complaint needed to state only a "conceivable" set of facts to support its legal claims. In other words, a court could not dismiss claims unless it appeared, beyond a reasonable doubt, that plaintiffs would be able to prove no set of facts in support of their claims that would entitle them to relief. In Twombly, the court adopted a stricter "plausibility" standard that required "enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of illegal agreement."