The NAM joined with DuPont in an amicus brief urging the Supreme Court to hear an appeal by Bell Atlantic of this consumer class action alleging, with merely conclusory allegations, that four Bell companies had conspired to prevent new entry in their respective territories and to refrain from entering each other's territories. The theory of the complaint was that the companies acted in a similar fashion, and that this parallel conduct must have been the result of a conspiracy.
However, antitrust law recognizes that mere parallel conduct, by itself, does not imply collusion or conspiracy, because it is often in a company's own independent self-interest to conduct business that way. Our brief argued that courts should not allow antitrust claims based on parallel conduct, without any allegation of facts relating to actual collusion. If such claims get past an early motion to dismiss, defendant companies will suffer enormous costs during the discovery phase of the litigation, and will be under great financial pressure to settle meritless claims. A lowered pleading standard will encourage plaintiffs to file questionable cases.
On Aug. 25, 2006, the NAM joined with 7 other business organizations in an amicus brief on the merits. We argued that a conspiracy case under the antitrust laws requires evidence that there was a contract, combination or conspiracy, and pleadings filed in the case must allege facts sufficient to show, if proven, that a law was broken. It is perfectly legal for companies to engage in parallel behavior that is arrived at independently of their competitors and that has a business rationale. If such “conscious parallelism” is legal, then it is inappropriate for a court, at any stage of a case, to allow the case to proceed on the inference that parallel behavior between competitors is illegal, unless there is some allegation of facts showing that the parallel behavior was brought about by a conspiracy.
In addition, we argued that courts should consider the risk of abusive litigation and enormous discovery costs when determining whether pleadings provide a sufficient basis for a lawsuit. Courts must use the tools they have to prevent class-action harassment of defendants, and are obligated to ensure a speedy and inexpensive determination of every case. Preventing abusive litigation is critical, especially in a case where virtually every person and business in the United States is part of the plaintiff class and where virtually the entire telephone and high-speed internet industry is alleged to have participated in an antitrust conspiracy.
The Supreme Court agreed. It ruled 5/21/07 that an allegation of parallel conduct and a bare assertion of conspiracy without enough factual matter to suggest that an agreement was made is insufficient to state a claim under Section 1 of the Sherman Act. It ruled that a complaint of this kind must not only be conceivable, it must be plausible. Justice Souter characterized a long-misunderstood statement in a 1957 case as having "earned its retirement." The statement, from Conley v. Gibson, was that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." What this actually means, according to the Court, is that once a claim has first been adequately stated, it may be supported by any set of facts, no matter how inventive, consistent with the allegations in the complaint. Since the claim in this case did not overcome the initial hurdle of plausibility, the lower court decision was reversed. This is an important ruling that will help judges control trial lawyers who overreach with questionable claims.