Govt., Industry Groups Support Bells in Twombly Supreme Court Appeal

The antitrust case centers on whether Verizon, AT&T, BellSouth and Qwest acted “in parallel” to curb competition by not competing in one anothers’ territories and by resisting CLEC entry in their own markets. Those filing briefs Fri. seemed at least as concerned that the 2nd Circuit decision set a bad precedent as by its implications for the Bells and other businesses. Many warned that Twombly didn’t offer facts to support conspiracy charges and was based on hard-to-prove allegations. They also cited language in the 2nd Circuit decision that appeared to make it hard for courts to dismiss parallel conduct cases without costly evidentiary discovery.

The attorneys general asked the high court “to confirm that the rules of pleading are not an invitation for filing lawsuits that fail to state a legal wrong or for embarking on ‘fishing expeditions.'” The state officials added: “Although the Second Circuit’s decision seems to be limited to the narrow area of antitrust law, lower courts will be tempted to extend its rationale to a variety of other areas including civil rights, election law and environmental matters… The states have a critical interest in reducing costs associated with unfounded lawsuits.”

The attorneys general also are concerned that the 2nd Circuit’s language seems to encourage discovery, they said: “The pleading standard articulated by the Second Circuit essentially eliminates the use of motions to dismiss in cases involving parallel conduct. By guaranteeing discovery in such cases, the standard adopted by the court will encourage plaintiffs to file first and investigate later.”

DoJ termed the Twombly appeals decision “insufficient.” The complainants didn’t produce proof that there was an agreement among the Bells to act in “parallel,” DoJ said: “Because an agreement is the critical factor distinguishing innocuous parallel conduct from a Section 1 [of the Sherman Act] violation, courts must insist on more than mere conclusory allegations of that element. The court of appeals’ standard -- which would appear to require nothing more than allegations of parallel conduct and a conclusory allegation of conspiracy -- is clearly insufficient.”

The America Bar Assn. weighed in, noting it isn’t taking sides in the business dispute. Its concern is for the law, the ABA said: “The question presented in this case is whether mere allegations of parallel conduct by competitors coupled with a bare bones allegation of conspiracy are sufficient to state the material element of conspiracy… The ABA submits that the experience of courts and practitioners… warrants a negative answer.” The ABA said “mere parallel conduct” doesn’t prove there was an agreement among the Bells to act the same way: “Indeed, parallel but independent conduct is expected in a perfectly competitive market.”

The ABA fears the 2nd Circuit ruling could raise litigation costs, it said: “The standard articulated by the Second Circuit would impose sizeable costs on defendants and courts in situations in which there is no apparent reason to conclude that unlawful activity occurred. In addition, the risk of actions based solely on parallel conduct would impede businesses from operating in the most efficient manner by raising the cost and risk of unilateral conduct, and ironically would undermine pro-competitive decisions that parallel those of competitors.”

The American Petroleum Institute said “parallel business conduct is extremely common and usually results from independent decisionmaking by competitors pursuing their own economic interests.” Therefore, parallel conduct itself doesn’t break antitrust laws, API said. But under the 2nd Circuit decision “antitrust plaintiffs can defeat a motion to dismiss a claim… and subject the defendants to costly, burdensome and protracted discovery by combining allegations of parallel conduct with a conclusory allegation of a conspiracy in restraint of trade.” API said its members, fearful of such suits, “have a strong interest in the standard that applies in cases alleging that parallel business conduct states an antitrust claim.”

The U.S. Chamber of Commerce -- joined by CTIA, the National Assn. of Manufacturers and other business entities - - expressed concern “not only that the decision… sets a pleading standard for antitrust litigation that is inconsistent with both substantive antitrust law and general pleading law, but also that it does so in a context -- a massive consumer class action complaint -- that unleashes the most abusive kind of litigation.”

The Bells in a joint brief said the “plaintiffs implicitly conceded… that they lacked any basis to make such direct factual allegations of conspiracy.” Instead, they “relied entirely on the inference of conspiracy that they claimed should be drawn from the alleged parallel conduct,” the Bells said. “Under the Second Circuit’s standard, a complaint alleging otherwise innocuous parallel conduct can survive a motion to dismiss based merely on the possibility that facts… might yet be found that would support the claim for relief.” The appeals court decision, “wrong as a matter of pleading law and harmful as a matter of antitrust policy, should be reversed,” the Bells said. Two other supporting briefs were filed, one by 24 economists, the other by a group of legal scholars.

The 2nd Circuit judges weighed such arguments, said Douglas Richards, an attorney for Twombly. The court’s opinion said: “We have consistently rejected the argument -- put forward by successive generations of lawyers representing clients defending against civil antitrust claims -- that antitrust complaints merit a more rigorous pleading standard.” The opinion also said the court had weighed concerns about the difficulty of dismissing parallel cases without going through discovery. “We are not unsympathetic to these concerns, but we find the arguments based on them ultimately unconvincing,” the court said.