Supreme Court of the United States
BELL ATLANTIC CORPORATION et al., Petitioners,
v.
William TWOMBLY et al.
No. 05-1126.
Argued Nov. 27, 2006.
Decided May 21, 2007.
SOUTER, J., delivered the opinion of the Court, in which ROBERTS, C.
J., and SCALIA, KENNEDY, THOMAS, BREYER, and ALITO, JJ., joined.
STEVENS, J., filed a dissenting opinion, in which GINSBURG, J., joined,
except as to Part IV.
Justice SOUTER delivered the opinion of the Court.
Liability under § 1 of the Sherman Act, 15 U.S.C. § 1,
requires a “contract, combination ..., or conspiracy, in restraint of
trade or commerce.” The question in this putative class action is
whether a § 1 complaint can survive a motion to dismiss when it
alleges that major telecommunications providers engaged in certain
parallel conduct unfavorable to competition, absent some factual
context suggesting agreement, as distinct from identical, independent
action. We hold that such a complaint should be dismissed.
I
The upshot of the 1984 divestiture of the American Telephone &
Telegraph Company's (AT & T) local telephone business was a system
of regional service monopolies (variously called “Regional Bell
Operating Companies,” “Baby Bells,” or “Incumbent Local Exchange
Carriers” (ILECs)), and a separate, competitive market for
long-distance service from which the ILECs were excluded. More than a
decade later, Congress withdrew approval of the ILECs' monopolies by
enacting the Telecommunications Act of 1996 (1996 Act), 110 Stat. 56,
which “fundamentally restructure[d] local telephone markets” and
“subject[ed] [ILECs] to a host of duties intended to facilitate market
entry.” AT & T Corp. v. Iowa Utilities Bd., 525 U.S. 366, 371, 119
S.Ct. 721, 142 L.Ed.2d 835 (1999). In recompense, the 1996 Act set
conditions for authorizing ILECs to enter the long-distance market. See
47 U.S.C. § 271.
“Central to the [new] scheme [was each ILEC's] obligation ... to share
its network with competitors,” Verizon Communications Inc. v. Law
Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 402, 124 S.Ct. 872, 157
L.Ed.2d 823 (2004), which came to be known as “competitive local
exchange carriers” (CLECs), Pet. for Cert. 6, n. 1. A CLEC could make
use of an ILEC's network in any of three ways: by (1) “purchas[ing]
local telephone services at wholesale rates for resale to end users,”
(2) “leas[ing] elements of the [ILEC's] network ‘on an unbundled
basis,’ ” or (3) “interconnect[ing] its own facilities with the
[ILEC's] network.” Iowa Utilities Bd., supra, at 371, 119 S.Ct. 721
(quoting 47 U.S.C. § 251(c)). Owing to the “considerable expense
and effort” required to make unbundled network elements available to
rivals at wholesale prices, Trinko, supra, at 410, 124 S.Ct. 872, the
ILECs vigorously litigated the scope of the sharing obligation imposed
by the 1996 Act, with the result that the Federal Communications
Commission (FCC) three times revised its regulations to narrow the
range of network elements to be shared with the CLECs.
Respondents William Twombly and Lawrence Marcus (hereinafter
plaintiffs) represent a putative class consisting of all “subscribers
of local telephone and/or high speed internet services ... from
February 8, 1996 to present.” Amended Complaint in No. 02 CIV.
10220(GEL) (SDNY) ¶ 53, App. 28 (hereinafter Complaint). In this
action against petitioners, a group of ILECs, plaintiffs seek treble
damages and declaratory and injunctive relief for claimed violations of
§ 1 of the Sherman Act, ch. 647, 26 Stat. 209, as amended, 15
U.S.C. § 1, which prohibits “[e]very contract, combination in the
form of trust or otherwise, or conspiracy, in restraint of trade or
commerce among the several States, or with foreign nations.”
The complaint alleges that the ILECs conspired to restrain trade in two
ways, each supposedly inflating charges for local telephone and
high-speed Internet services. Plaintiffs say, first, that the ILECs
“engaged in parallel conduct” in their respective service areas to
inhibit the growth of upstart CLECs. Complaint ¶ 47, App. 23-26.
Their actions allegedly included making unfair agreements with the
CLECs for access to ILEC networks, providing inferior connections to
the networks, overcharging, and billing in ways designed to sabotage
the CLECs' relations with their own customers. Ibid. According to the
complaint, the ILECs' “compelling common motivatio[n]” to thwart the
CLECs' competitive efforts naturally led them to form a conspiracy;
“[h]ad any one [ILEC] not sought to prevent CLECs ... from competing
effectively ..., the resulting greater competitive inroads into that
[ILEC's] territory would have revealed the degree to which competitive
entry by CLECs would have been successful in the other territories in
the absence of such conduct.” Id., ¶ 50, App. 26-27.
Second, the complaint charges agreements by the ILECs to refrain from
competing against one another. These are to be inferred from the ILECs'
common failure “meaningfully [to] pursu[e]” “attractive business
opportunit[ies]” in contiguous markets where they possessed
“substantial competitive advantages,” id., ¶¶ 40-41, App.
21-22, and from a statement of Richard Notebaert, chief executive
officer (CEO) of the ILEC Qwest, that competing in the territory of
another ILEC “ ‘might be a good way to turn a quick dollar but that
doesn't make it right,’ ” id., ¶ 42, App. 22.
The complaint couches its ultimate allegations this way:
“In the absence of any meaningful competition between the [ILECs] in
one another's markets, and in light of the parallel course of conduct
that each engaged in to prevent competition from CLECs within their
respective local telephone and/or high speed internet services markets
and the other facts and market circumstances alleged above, Plaintiffs
allege upon information and belief that [the ILECs] have entered
into a contract, combination or conspiracy to prevent competitive entry
in their respective local telephone and/or high speed internet services
markets and have agreed not to compete with one another and otherwise
allocated customers and markets to one another.” Id., ¶ 51, App.
27.
The United States District Court for the Southern District of New York
dismissed the complaint for failure to state a claim upon which relief
can be granted. The District Court acknowledged that “plaintiffs may
allege a conspiracy by citing instances of parallel business behavior
that suggest an agreement,” but emphasized that “while
‘[c]ircumstantial evidence of consciously parallel behavior may have
made heavy inroads into the traditional judicial attitude toward
conspiracy[, ...] “conscious parallelism” has not yet read conspiracy
out of the Sherman Act entirely.’ ” 313 F.Supp.2d 174, 179 (2003).
Thus, the District Court understood that
allegations of parallel business conduct, taken alone, do not state a
claim under § 1; plaintiffs must allege additional facts that
“ten[d] to exclude independent self-interested conduct as an
explanation for defendants' parallel behavior.” 313 F.Supp.2d, at 179.
The District Court found plaintiffs' allegations of parallel ILEC
actions to discourage competition inadequate because “the behavior of
each ILEC in resisting the incursion of CLECs is fully explained by the
ILEC's own interests in defending its individual territory.” Id., at
183. As to the ILECs' supposed agreement against competing with each
other, the District Court found that the complaint does not “alleg[e]
facts ... suggesting that refraining from competing in other
territories as CLECs was contrary to [the ILECs'] apparent economic
interests, and consequently [does] not rais[e] an inference that [the
ILECs'] actions were the result of a conspiracy.” Id., at 188.
The Court of Appeals for the Second Circuit reversed, holding that the
District Court tested the complaint by the wrong standard. It held that
“plus factors are not required to be pleaded to permit an antitrust
claim based on parallel conduct to survive dismissal.” 425 F.3d 99, 114
(2005). Although the Court of Appeals took the
view that plaintiffs must plead facts that “include conspiracy among
the realm of ‘plausible’ possibilities in order to survive a motion to
dismiss,” it then said that “to rule that allegations of parallel
anticompetitive conduct fail to support a plausible conspiracy claim, a
court would have to conclude that there is no set of facts that would
permit a plaintiff to demonstrate that the particular parallelism
asserted was the product of collusion rather than coincidence.” Ibid.
We granted certiorari to address the proper standard for pleading an
antitrust conspiracy through allegations of parallel conduct, 547 U.S.
----, 126 S.Ct. 2965, 165 L.Ed.2d 949 (2006), and now reverse.
II
A
Because § 1 of the Sherman Act “does not prohibit [all]
unreasonable restraints of trade ... but only restraints effected by a
contract, combination, or conspiracy,” Copperweld Corp. v. Independence
Tube Corp., 467 U.S. 752, 775, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984),
“[t]he crucial question” is whether the challenged anticompetitive
conduct “stem[s] from independent decision or from an agreement, tacit
or express,” Theatre Enterprises, 346 U.S., at 540, 74 S.Ct. 257. While
a showing of parallel “business behavior is admissible circumstantial
evidence from which the fact finder may infer agreement,” it falls
short of “conclusively establish[ing] agreement or ... itself
constitut[ing] a Sherman Act offense.” Id., at 540-541, 74 S.Ct. 257.
Even “conscious parallelism,” a common reaction of “firms in a
concentrated market [that] recogniz[e] their shared economic interests
and their interdependence with respect to price and output decisions”
is “not in itself unlawful.” Brooke Group Ltd. v. Brown &
Williamson Tobacco Corp., 509 U.S. 209, 227, 113 S.Ct. 2578, 125
L.Ed.2d 168 (1993).
The inadequacy of showing parallel conduct or interdependence, without
more, mirrors the ambiguity of the behavior: consistent with
conspiracy, but just as much in line with a wide swath of rational and
competitive business strategy unilaterally prompted by common
perceptions of the market.
Accordingly, we have previously hedged against false inferences from
identical behavior at a number of points in the trial sequence. An
antitrust conspiracy plaintiff with evidence showing nothing beyond
parallel conduct is not entitled to a directed verdict; proof of a
§ 1 conspiracy must include
evidence tending to exclude the possibility of independent action; and
at the summary judgment stage a § 1
plaintiff's offer of conspiracy evidence must tend to rule out the
possibility that the defendants were acting independently.
B
This case presents the antecedent question of what a plaintiff must
plead in order to state a claim under § 1 of the Sherman Act.
Federal Rule of Civil Procedure 8(a)(2) requires only “a short and
plain statement of the claim showing that the pleader is entitled to
relief,” in order to “give the defendant fair notice of what the ...
claim is and the grounds upon which it rests,” Conley v. Gibson, 355
U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). While a complaint
attacked by a Rule 12(b)(6) motion to dismiss does not need detailed
factual allegations, a plaintiff's
obligation to provide the “grounds” of his “entitle[ment] to relief”
requires more than labels and conclusions, and a formulaic recitation
of the elements of a cause of action will not do. Factual allegations
must
be enough to raise a right to relief above the speculative level, FN3
on the assumption that all the allegations in the
complaint are true (even if doubtful in fact).
FN3. The dissent greatly oversimplifies matters by
suggesting that the Federal Rules somehow dispensed with the pleading
of facts altogether. See post, at 1979 (opinion of STEVENS, J.)
(pleading standard of Federal Rules “does not require, or even invite,
the pleading of facts”). While, for most types of cases, the Federal
Rules eliminated the cumbersome requirement that a claimant “set out in
detail the facts upon which he bases his claim,” Conley v. Gibson, 355
U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) (emphasis added), Rule
8(a)(2) still requires a “showing,” rather than a blanket assertion, of
entitlement to relief. Without some factual allegation in the
complaint, it is hard to see how a claimant could satisfy the
requirement of providing not only “fair notice” of the nature of the
claim, but also “grounds” on which the claim rests.
In applying these general standards to a § 1 claim, we hold
that stating such a claim requires a complaint with enough factual
matter (taken as true) to suggest that an agreement was made. Asking
for plausible grounds to infer an agreement does not impose a
probability requirement at the pleading stage; it simply calls for
enough fact to raise a reasonable expectation that discovery will
reveal evidence of illegal agreement. And, of course, a well-pleaded
complaint may proceed even if it strikes a savvy judge that actual
proof of those facts is improbable... In identifying facts that are
suggestive enough to
render a § 1 conspiracy plausible, we have the benefit of the
prior rulings and considered views of leading commentators, already
quoted, that lawful parallel conduct fails to bespeak unlawful
agreement. It makes sense to say, therefore, that an allegation of
parallel conduct and a bare assertion of conspiracy will not suffice.
Without more, parallel conduct does not suggest conspiracy, and a
conclusory allegation of agreement at some unidentified point does not
supply facts adequate to show illegality. Hence, when allegations of
parallel conduct are set out in order to make a § 1 claim, they
must be placed in a context that raises a suggestion of a preceding
agreement, not merely parallel conduct that could just as well be
independent action.
The need at the pleading stage for allegations plausibly suggesting
(not merely consistent with) agreement reflects the threshold
requirement of Rule 8(a)(2) that the “plain statement” possess enough
heft to “sho[w] that the pleader is entitled to relief.” A statement of
parallel conduct, even conduct consciously undertaken, needs some
setting suggesting the agreement necessary to make out a § 1
claim; without that further circumstance pointing toward a meeting of
the minds, an account of a defendant's commercial efforts stays in
neutral territory. An allegation of parallel conduct is thus much like
a naked assertion of conspiracy in a § 1 complaint: it gets the
complaint close to stating a claim, but without some further factual
enhancement it stops short of the line between possibility and
plausibility of “entitle[ment] to relief.”
We alluded to the practical significance of the Rule 8 entitlement
requirement in Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 125
S.Ct. 1627, 161 L.Ed.2d 577 (2005), when we explained that something
beyond the mere possibility of loss causation must be alleged, lest a
plaintiff with “ ‘a largely groundless claim’ ” be allowed to “ ‘take
up the time of a number of other people, with the right to do so
representing an in terrorem increment of the settlement value.’ ” Id.,
at 347, 125 S.Ct. 1627. So, when the
allegations in a complaint, however true, could not raise a claim of
entitlement to relief, “ ‘this basic deficiency should ... be exposed
at the point of minimum expenditure of time and money by the parties
and the court.’ ” 5 Wright & Miller § 1216, at 233-234.
Thus, 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. As we indicated over 20 years ago in
Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U.S. 519,
528, n. 17, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983), “a district court
must retain the power to insist upon some specificity in pleading
before allowing a potentially massive factual controversy to
proceed.” That potential
expense is obvious enough in the present case: plaintiffs represent a
putative class of at least 90 percent of all subscribers to local
telephone or high-speed Internet service in the continental United
States, in an action against America's largest telecommunications firms
(with many thousands of employees generating reams and gigabytes of
business records) for unspecified (if any) instances of antitrust
violations that allegedly occurred over a period of seven years.
It is no answer to say that a claim just shy of a plausible entitlement
to relief can, if groundless, be weeded out early in the discovery
process through “careful case management,” post at 1975, given the
common lament that the success of judicial supervision in checking
discovery abuse has been on the modest side. And it
is self-evident that the problem of discovery abuse cannot be solved by
“careful scrutiny of evidence at the summary judgment stage,” much less
“lucid instructions to juries,” post, at 1975; the threat of discovery
expense will push cost-conscious defendants to settle even anemic cases
before reaching those proceedings. Probably, then, it is only by taking
care to require allegations that reach the level suggesting conspiracy
that we can hope to avoid the potentially enormous expense of discovery
in cases with no “ ‘reasonably founded hope that the [discovery]
process will reveal relevant evidence’ ” to support a § 1 claim.
Dura, 544 U.S., at 347, 125 S.Ct. 1627.FN6
FN6. The dissent takes heart in the reassurances of
plaintiffs' counsel that discovery would be “ ‘ “phased” ’ ” and
“limited to the existence of the alleged conspiracy and class
certification.” Post, at ----24. But determining whether some illegal
agreement may have taken place between unspecified persons at different
ILECs (each a multibillion dollar corporation with legions of
management level employees) at some point over seven years is a
sprawling, costly, and hugely time-consuming undertaking not easily
susceptible to the kind of line drawing and case management that the
dissent envisions. Perhaps the best answer to the dissent's optimism
that antitrust discovery is open to effective judicial control is a
more extensive quotation of the authority just cited, a judge with a
background in antitrust law. Given the system that we have, the hope of
effective judicial supervision is slim: “The timing is all wrong. The
plaintiff files a sketchy complaint (the Rules of Civil Procedure
discourage fulsome documents), and discovery is launched. A judicial
officer does not know the details of the case the parties will present
and in theory cannot know the details. Discovery is used to find the
details. The judicial officer always knows less than the parties, and
the parties themselves may not know very well where they are going or
what they expect to find. A magistrate supervising discovery does
not-cannot-know the expected productivity of a given request, because
the nature of the requester's claim and the contents of the files (or
head) of the adverse party are unknown. Judicial officers cannot
measure the costs and benefits to the requester and so cannot isolate
impositional requests. Requesters have no reason to disclose their own
estimates because they gain from imposing costs on rivals (and may lose
from an improvement in accuracy). The portions of the Rules of Civil
Procedure calling on judges to trim back excessive demands, therefore,
have been, and are doomed to be, hollow. We cannot prevent what we
cannot detect; we cannot detect what we cannot define; we cannot define
‘abusive’ discovery except in theory, because in practice we lack
essential information.” Easterbrook, Discovery as Abuse, 69 B.U.L.Rev.
635, 638-639 (1989).
Plaintiffs do not, of course, dispute the requirement of plausibility
and the need for something more than merely parallel behavior explained
in Theatre Enterprises, Monsanto, and Matsushita, and their main
argument against the plausibility standard at the pleading stage is its
ostensible conflict with an early statement of ours construing Rule 8.
Justice Black's opinion for the Court in Conley v. Gibson spoke not
only of the need for fair notice of the grounds for entitlement to
relief but of “the accepted rule 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.” 355 U.S., at 45-46, 78 S.Ct. 99.
This “no set of facts” language can be read in isolation as saying that
any statement revealing the theory of the claim will suffice unless its
factual impossibility may be shown from the face of the pleadings; and
the Court of Appeals appears to have read Conley in some such way when
formulating its understanding of the proper pleading standard, see 425
F.3d, at 106, 114 (invoking Conley's “no set of facts” language in
describing the standard for dismissal).
On such a focused and literal reading of Conley's “no set of facts,” a
wholly conclusory statement of claim would survive a motion to dismiss
whenever the pleadings left open the possibility that a plaintiff might
later establish some “set of [undisclosed] facts” to support recovery.
So here, the Court of Appeals specifically found the prospect of
unearthing direct evidence of conspiracy sufficient to preclude
dismissal, even though the complaint does not set forth a single fact
in a context that suggests an agreement. 425 F.3d, at 106, 114. It
seems fair to say that this approach to pleading would dispense with
any showing of a “ ‘reasonably founded hope’ ” that a plaintiff would
be able to make a case; Mr.
Micawber's optimism would be enough.
Seeing this, a good many judges and commentators have balked at taking
the literal terms of the Conley passage as a pleading standard.
[Citations.]
We could go on, but there is no need to pile up further citations to
show that Conley's “no set of facts” language has been questioned,
criticized, and explained away long enough. To be fair to the Conley
Court, the passage should be understood in light of the opinion's
preceding summary of the complaint's concrete allegations, which the
Court quite reasonably understood as amply stating a claim for relief.
But the passage so often quoted fails to mention this understanding on
the part of the Court, and after puzzling the profession for 50 years,
this famous observation has earned its retirement. The phrase is best
forgotten as an incomplete, negative gloss on an accepted pleading
standard: once a claim has been stated adequately, it may be supported
by showing any set of facts consistent with the allegations in the
complaint. Conley, then, described the breadth of opportunity to prove
what an adequate complaint claims, not the minimum standard of adequate
pleading to govern a complaint's survival.
The dissent finds relevance in Court of Appeals
precedents from the 1940s, which allegedly gave rise to Conley's “no
set of facts” language. Even indulging this
line of analysis, these cases do not challenge the understanding that,
before proceeding to discovery, a complaint must allege facts
suggestive of illegal conduct. Rather, these cases stand for the
unobjectionable
proposition that, when a complaint adequately states a claim, it may
not be dismissed based on a district court's assessment that the
plaintiff will fail to find evidentiary support for his allegations or
prove his claim to the satisfaction of the factfinder.
III
When we look for plausibility in this complaint, we agree with the
District Court that plaintiffs' claim of conspiracy in restraint of
trade comes up short. To begin with, the complaint leaves no doubt that
plaintiffs rest their § 1 claim on descriptions of parallel
conduct and not on any independent allegation of actual agreement among
the ILECs. Supra, at 1962 - 1963. Although in form a few stray
statements speak directly of agreement, on fair reading these are
merely legal conclusions resting on the prior allegations. Thus, the
complaint first takes account of the alleged “absence of any meaningful
competition between [the ILECs] in one another's markets,” “the
parallel course of conduct that each [ILEC] engaged in to prevent
competition from CLECs,” “and the other facts and market circumstances
alleged [earlier]”; “in light of” these, the complaint concludes “that
[the ILECs] have entered into a contract, combination or conspiracy to
prevent competitive entry into their ... markets and have agreed not to
compete with one another.” Complaint ¶ 51, App. 27.FN10 The nub of
the complaint, then, is the ILECs' parallel behavior, consisting of
steps to keep the CLECs out and manifest disinterest in becoming CLECs
themselves, and its sufficiency turns on the suggestions raised by this
conduct when viewed in light of common economic experience.FN11
FN10. If the complaint had not explained that the
claim of agreement rested on the parallel conduct described, we doubt
that the complaint's references to an agreement among the ILECs would
have given the notice required by Rule 8. Apart from identifying a
seven-year span in which the § 1 violations were supposed to have
occurred ( i.e., “[b]eginning at least as early as February 6, 1996,
and continuing to the present,” id., ¶ 64, App. 30), the pleadings
mentioned no specific time, place, or person involved in the alleged
conspiracies. This lack of notice contrasts sharply with the model form
for pleading negligence, Form 9 [now Form 11], which the dissent says
exemplifies the
kind of “bare allegation” that survives a motion to dismiss. Post, at
1977. Whereas the model form alleges that the defendant struck the
plaintiff with his car while plaintiff was crossing a particular
highway at a specified date and time, the complaint here furnishes no
clue as to which of the four ILECs (much less which of their employees)
supposedly agreed, or when and where the illicit agreement took place.
A defendant wishing to prepare an answer in the simple fact pattern
laid out in Form 9 would know what to answer; a defendant seeking to
respond to plaintiffs' conclusory allegations in the § 1 context
would have little idea where to begin.
FN11. The dissent's quotations from the complaint
leave the impression that plaintiffs directly allege illegal agreement;
in fact, they proceed exclusively via allegations of parallel conduct,
as both the District Court and Court of Appeals recognized. See 313
F.Supp.2d 174, 182 (S.D.N.Y.2003); 425 F.3d 99, 102-104 (C.A. 2005).
We think that nothing contained in the complaint invests either the
action or inaction alleged with a plausible suggestion of conspiracy.
As to the ILECs' supposed agreement to disobey the 1996 Act and thwart
the CLECs' attempts to compete, we agree with the District Court that
nothing in the complaint intimates that the resistance to the upstarts
was anything more than the natural, unilateral reaction of each ILEC
intent on keeping its regional dominance. The 1996 Act did more than
just subject the ILECs to competition; it obliged them to subsidize
their competitors with their own equipment at wholesale rates. The
economic incentive to resist was powerful, but resisting competition is
routine market conduct, and even if the ILECs flouted the 1996 Act in
all the ways the plaintiffs allege, see id., ¶ 47, App. 23-24,
there is no reason to infer that the companies had agreed among
themselves to do what was only natural anyway; so natural, in fact,
that if alleging parallel decisions to resist competition were enough
to imply an antitrust conspiracy, pleading a § 1 violation against
almost any group of competing businesses would be a sure thing.
The complaint makes its closest pass at a predicate for conspiracy with
the claim that collusion was necessary because success by even one CLEC
in an ILEC's territory “would have revealed the degree to which
competitive entry by CLECs would have been successful in the other
territories.” Id., ¶ 50, App. 26-27. But, its logic aside, this
general premise still fails to answer the point that there was just no
need for joint encouragement to resist the 1996 Act; as the District
Court said, “each ILEC has reason to want to avoid dealing with CLECs”
and “each ILEC would attempt to keep CLECs out, regardless of the
actions of the other ILECs.” 313 F.Supp.2d, at 184.
Plaintiffs' second conspiracy theory rests on the competitive reticence
among the ILECs themselves in the wake of the 1996 Act, which was
supposedly passed in the “ ‘hop[e] that the large incumbent local
monopoly companies ... might attack their neighbors' service areas, as
they are the best situated to do so.’ ” Complaint ¶ 38, App. 20.
Contrary to hope, the
ILECs declined “ ‘to enter each other's service territories in any
significant way,’ ” Complaint ¶ 38, App. 20, and the local
telephone and high speed Internet market remains highly
compartmentalized geographically, with minimal competition. Based on
this state of affairs, and perceiving the ILECs to be blessed with
“especially attractive business opportunities” in surrounding markets
dominated by other ILECs, the plaintiffs assert that the ILECs'
parallel conduct was “strongly suggestive of conspiracy.” Id., ¶
40, App. 21.
But it was not suggestive of conspiracy, not if history teaches
anything. In a traditionally unregulated industry with low barriers to
entry, sparse competition among large firms dominating separate
geographical segments of the market could very well signify illegal
agreement, but here we have an obvious alternative explanation. In the
decade preceding the 1996 Act and well before that, monopoly was the
norm in telecommunications, not the exception. The ILECs were born in
that world,
doubtless liked the world the way it was, and surely knew the adage
about him who lives by the sword. Hence, a natural explanation for the
noncompetition alleged is that the former Government-sanctioned
monopolists were sitting tight, expecting their neighbors to do the
same thing.
In fact, the complaint itself gives reasons to believe that the ILECs
would see their best interests in keeping to their old turf. Although
the complaint says generally that the ILECs passed up “especially
attractive business opportunit[ies]” by declining to compete as CLECs
against other ILECs, Complaint ¶ 40, App. 21, it does not allege
that competition as CLECs was potentially any more lucrative than other
opportunities being pursued by the ILECs during the same period,
and the complaint is replete with indications that any CLEC faced
nearly insurmountable barriers to profitability owing to the ILECs'
flagrant resistance to the network sharing requirements of the 1996
Act, id., ¶ 47; App. 23-26. Not only that, but even without a
monopolistic tradition and the peculiar difficulty of mandating shared
networks, “[f]irms do not expand without limit and none of them enters
every market that an outside observer might regard as profitable, or
even a small portion of such markets.” Areeda & Hovenkamp ¶
307d, at 155 (Supp.2006) (commenting on the case at bar). The upshot is
that Congress may have expected some ILECs to become CLECs in the
legacy territories of other ILECs, but the disappointment does not make
conspiracy plausible. We agree with the District Court's assessment
that antitrust conspiracy was not suggested by the facts adduced under
either theory of the complaint, which thus fails to state a valid
§ 1 claim.FN14
Notebaert was also quoted as saying that entering
new markets as a CLEC would not be “a sustainable economic model”
because the CLEC pricing model is “just ... nuts.” Chicago Tribune,
Oct. 31, 2002, Business Section, p. 1 (cited at Complaint ¶ 42,
App. 22). Another source cited in the complaint quotes Notebaert as
saying he thought it “unwise” to “base a business plan” on the
privileges accorded to CLECs under the 1996 Act because the regulatory
environment was too unstable. Chicago Tribune, Dec. 19, 2002, Business
Section, p. 2 (cited at Complaint ¶ 45, App. 23).
FN14. In reaching this conclusion, we do not apply
any “heightened” pleading standard, nor do we seek to broaden the scope
of Federal Rule of Civil Procedure 9, which can only be accomplished “
‘by the process of amending the Federal Rules, and not by judicial
interpretation.’ ” Swierkiewicz v. Sorema N. A., 534 U.S. 506, 515, 122
S.Ct. 992, 152 L.Ed.2d 1 (2002). On certain subjects understood to
raise a high risk of abusive litigation, a plaintiff must state factual
allegations with greater particularity than Rule 8 requires. Fed. Rules
Civ. Proc. 9(b)-(c). Here, our concern is not that the allegations in
the complaint were insufficiently “particular[ized]”, ibid.; rather,
the complaint warranted dismissal because it failed in toto to render
plaintiffs' entitlement to relief plausible.
...
[W]e do not require heightened fact pleading of
specifics, but only enough facts to state a claim to relief that is
plausible on its face. Because the plaintiffs here have not nudged
their claims across the line from conceivable to plausible, their
complaint must be dismissed.
* * *
The judgment of the Court of Appeals for the Second Circuit is
reversed, and the cause is remanded for further proceedings consistent
with this opinion.
It is so ordered.
Justice STEVENS, with whom Justice GINSBURG joins except as to Part IV,
dissenting.
In the first paragraph of its 24-page opinion the Court states that the
question to be decided is whether allegations that “major
telecommunications providers engaged in certain parallel conduct
unfavorable to competition” suffice to state a violation of § 1 of
the Sherman Act. Ante, at 1961. The answer to that question has been
settled for more than 50 years. If that were indeed the issue, a
summary reversal citing Theatre Enterprises, Inc. v. Paramount Film
Distributing Corp., 346 U.S. 537, 74 S.Ct. 257, 98 L.Ed. 273 (1954),
would adequately resolve this case. As Theatre Enterprises held,
parallel conduct is circumstantial evidence admissible on the issue of
conspiracy, but it is not itself illegal. Id., at 540-542, 74 S.Ct. 257.
Thus, this is a case in which there is no dispute about the substantive
law. If the defendants acted independently, their conduct was perfectly
lawful. If, however, that conduct is the product of a horizontal
agreement among potential competitors, it was unlawful. Plaintiffs have
alleged such an agreement and, because the complaint was dismissed in
advance of answer, the allegation has not even been denied. Why, then,
does the case not proceed? Does a judicial opinion that the charge is
not “plausible” provide a legally acceptable reason for dismissing the
complaint? I think not.
Respondents' amended complaint describes a variety of circumstantial
evidence and makes the straightforward allegation that petitioners
“entered into a contract, combination or conspiracy to prevent
competitive entry in their respective local telephone and/or high speed
internet services markets and have agreed not to compete with one
another and otherwise allocated customers and markets to one another.”
Amended Complaint in No. 02 CIV. 10220(GEL) (SDNY) ¶ 51, App. 27
(hereinafter Complaint).
The complaint explains that, contrary to Congress' expectation when it
enacted the 1996 Telecommunications Act, and consistent with their own
economic self-interests, petitioner Incumbent Local Exchange Carriers
(ILECs) have assiduously avoided infringing upon each other's markets
and have refused to permit nonincumbent competitors to access their
networks. The complaint quotes Richard Notebaert, the former CEO of one
such ILEC, as saying that competing in a neighboring ILEC's territory
“might be a good way to turn a quick dollar but that doesn't make it
right.” Id., ¶ 42, App. 22. Moreover, respondents allege that
petitioners “communicate amongst themselves” through numerous industry
associations. Id., ¶ 46, App. 23. In sum, respondents allege that
petitioners entered into an agreement that has long been recognized as
a classic per se violation of the Sherman Act.
Under rules of procedure that have been well settled since well before
our decision in Theatre Enterprises, a judge ruling on a defendant's
motion to dismiss a complaint, “must accept as true all of the factual
allegations contained in the complaint.” Swierkiewicz v. Sorema N. A.,
534 U.S. 506, 508, n. 1, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002). But
instead of requiring knowledgeable executives
such as Notebaert to respond to these allegations by way of sworn
depositions or other limited discovery-and indeed without so much as
requiring petitioners to file an answer denying that they entered into
any agreement-the majority permits immediate dismissal based on the
assurances of company lawyers that nothing untoward was afoot. The
Court embraces the argument of those lawyers that “there is no reason
to infer that the companies had agreed among themselves to do what was
only natural anyway,” ante, at 1971; that “there was just no need for
joint encouragement to resist the 1996 Act,” ante, at 1971; and that
the “natural explanation for the noncompetition alleged is that the
former Government-sanctioned monopolists were sitting tight, expecting
their neighbors to do the same thing,” ante, at 1972.
The Court and petitioners' legal team are no doubt correct that the
parallel conduct alleged is consistent with the absence of any
contract, combination, or conspiracy. But that conduct is also entirely
consistent with the presence of the illegal agreement alleged in the
complaint. And the charge that petitioners “agreed not to compete with
one another” is not just one of “a few stray statements,” ante, at
1970; it is an allegation describing unlawful conduct. As such, the
Federal Rules of Civil Procedure, our longstanding precedent, and sound
practice mandate that the District Court at least require some sort of
response from petitioners before dismissing the case.
Two practical concerns presumably explain the Court's dramatic
departure from settled procedural law. Private antitrust litigation can
be enormously expensive, and there is a risk that jurors may mistakenly
conclude that evidence of parallel conduct has proved that the parties
acted pursuant to an agreement when they in fact merely made similar
independent decisions. Those concerns merit careful case management,
including strict control of discovery, careful scrutiny of evidence at
the summary judgment stage, and lucid instructions to juries; they do
not, however, justify the dismissal of an adequately pleaded complaint
without even requiring the defendants to file answers denying a charge
that they in fact engaged in collective decisionmaking. More
importantly, they do not justify an interpretation of Federal Rule of
Civil Procedure 12(b)(6) that seems to be driven by the majority's
appraisal of the plausibility of the ultimate factual allegation rather
than its legal sufficiency.
I
Rule 8(a)(2) of the Federal Rules requires that a complaint contain “a
short and plain statement of the claim showing that the pleader is
entitled to relief.” The rule did not come about by happenstance and
its language is not inadvertent. The English experience with Byzantine
special pleading rules-illustrated by the hypertechnical Hilary rules
of 1834 -made obvious the appeal of a pleading standard that was
easy for the common litigant to understand and sufficed to put the
defendant on notice as to the nature of the claim against him and the
relief sought. Stateside, David Dudley Field developed the highly
influential New York Code of 1848, which required “[a] statement of the
facts constituting the cause of action, in ordinary and concise
language, without repetition, and in such a manner as to enable a
person of common understanding to know what is intended.” An Act to
Simplify and Abridge the Practice, Pleadings and Proceedings of the
Courts of this State, ch. 379, § 120(2), 1848 N.Y. Laws pp. 497,
521. Substantially similar language appeared in the Federal Equity
Rules adopted in 1912.
A difficulty arose, however, in that the Field Code and its progeny
required a plaintiff to plead “facts” rather than “conclusions,” a
distinction that proved far easier to say than to apply. As
commentators have noted,
“it is virtually impossible logically to distinguish among ‘ultimate
facts,’ ‘evidence,’ and ‘conclusions.’ Essentially any allegation in a
pleading must be an assertion that certain occurrences took place. The
pleading spectrum, passing from evidence through ultimate facts to
conclusions, is largely a continuum varying only in the degree of
particularity with which the occurrences are described.” Weinstein
& Distler, Comments on Procedural Reform: Drafting Pleading Rules,
57 Colum. L.Rev. 518, 520-521 (1957).
Rule 8 was directly responsive to this difficulty. Its drafters
intentionally avoided any reference to “facts” or “evidence” or
“conclusions.”
Under the relaxed pleading standards of the Federal Rules, the idea was
not to keep litigants out of court but rather to keep them in. The
merits of a claim would be sorted out during a flexible pretrial
process and, as appropriate, through the crucible of trial. Charles E.
Clark, the “principal draftsman” of the Federal
Rules, put it thus:
“Experience has shown ... that we cannot expect the proof of the case
to be made through the pleadings, and that such proof is really not
their function. We can expect a general statement distinguishing the
case from all others, so that the manner and form of trial and remedy
expected are clear, and so that a permanent judgment will result.” The
New Federal Rules of Civil Procedure: The Last Phase-Underlying
Philosophy Embodied in Some of the Basic Provisions of the New
Procedure, 23 A.B.A.J. 976, 977 (1937) (hereinafter Clark, New Federal
Rules).
The pleading paradigm under the new Federal Rules was well illustrated
by the inclusion in the appendix of Form 9 [now Form 11], a complaint
for negligence.
As relevant, the Form 9 complaint states only: “On June 1, 1936, in a
public highway called Boylston Street in Boston, Massachusetts,
defendant negligently drove a motor vehicle against plaintiff who was
then crossing said highway.” Form 9, Complaint for Negligence, Forms
App., Fed. Rules Civ. Proc., 28 U.S.C.App., p. 829 (hereinafter Form
9). The complaint then describes the plaintiff's injuries and demands
judgment. The asserted ground for relief-namely, the defendant's
negligent driving-would have been called a “ ‘conclusion of law’ ”
under the code pleading of old. But that bare
allegation suffices under a system that “restrict[s] the pleadings to
the task of general notice-giving and invest[s] the
deposition-discovery process with a vital role in the preparation for
trial.” Hickman v. Taylor, 329 U.S. 495, 501, 67 S.Ct. 385, 91
L.Ed. 451 (1947).
II
It is in the context of this history that Conley v. Gibson, 355 U.S.
41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), must be understood. The Conley
plaintiffs were black railroad workers who alleged that their union
local had refused to protect them against discriminatory discharges, in
violation of the National Railway Labor Act. The union sought to
dismiss the complaint on the ground that its general allegations of
discriminatory treatment by the defendants lacked sufficient
specificity. Writing for a unanimous Court, Justice Black rejected the
union's claim as foreclosed by the language of Rule 8. Id., at 47-48,
78 S.Ct. 99. In the course of doing so, he articulated the formulation
the Court rejects today: “In appraising the sufficiency of the
complaint we follow, of course, the accepted rule 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.” Id., at 45-46, 78 S.Ct.
99.
Consistent with the design of the Federal Rules, Conley's “no set of
facts” formulation permits outright dismissal only when proceeding to
discovery or beyond would be futile. Once it is clear that a plaintiff
has stated a claim that, if true, would entitle him to relief, matters
of proof are appropriately relegated to other stages of the trial
process. Today, however, in its explanation of a decision to dismiss a
complaint that it regards as a fishing expedition, the Court scraps
Conley's “no set of facts” language. Concluding that the phrase has
been “questioned, criticized, and explained away long enough,” ante, at
1969, the Court dismisses it as careless composition.
If Conley's “no set of facts” language is to be interred, let it not be
without a eulogy. That exact language, which the majority says has
“puzzl[ed] the profession for 50 years,” ibid., has been cited as
authority in a dozen opinions of this Court and four separate
writings. In not one of those 16 opinions was the language
“questioned,” “criticized,” or “explained away.” Indeed, today's
opinion is the first by any Member of this Court to express any doubt
as to the adequacy of the Conley formulation. Taking their cues from
the federal courts, 26 States and the District of Columbia utilize as
their standard for dismissal of a complaint the very language the
majority repudiates: whether it appears “beyond doubt” that “no set of
facts” in support of the claim would entitle the plaintiff to relief.
Petitioners have not requested that the Conley formulation be retired,
nor have any of the six amici who filed briefs in support of
petitioners. I would not rewrite the Nation's civil procedure textbooks
and call into doubt the pleading rules of most of its States without
far more informed deliberation as to the costs of doing so. Congress
has established a process-a rulemaking process-for revisions of that
order.
Today's majority calls Conley's “ ‘no set of facts' ” language “an
incomplete, negative gloss on an accepted pleading standard: once a
claim has been stated adequately, it may be supported by showing any
set of facts consistent with the allegations in the complaint.” Ante,
at 1969. This is not and cannot be what the Conley Court meant. First,
as I have explained, and as the Conley Court well knew, the pleading
standard the Federal Rules meant to codify does not require, or even
invite, the pleading of facts. FN6 The “pleading standard” label the
majority gives to what it reads into the Conley opinion-a statement of
the permissible factual support for an adequately pleaded
complaint-would not, therefore, have impressed the Conley Court itself.
Rather, that Court would have understood the majority's remodeling of
its language to express an evidentiary standard, which the Conley Court
had neither need nor want to explicate. Second, it is pellucidly clear
that the Conley Court was interested in what a complaint must contain,
not what it may contain. In fact, the Court said without qualification
that it was “appraising the sufficiency of the complaint.” 355 U.S., at
45, 78 S.Ct. 99 (emphasis added). It was, to paraphrase today's
majority, describing “the minimum standard of adequate pleading to
govern a complaint's survival,” ante, at 1969.
FN6. The majority is correct to say that what the
Federal Rules require is a “ ‘showing’ ” of entitlement to relief.
Ante, at 1965, n. 3. Whether and to what extent that “showing” requires
allegations of fact will depend on the particulars of the claim. For
example, had the amended complaint in this case alleged only parallel
conduct, it would not have made the required “showing.” See supra, at
1974. Similarly, had the pleadings contained only an allegation of
agreement, without specifying the nature or object of that agreement,
they would have been susceptible to the charge that they did not
provide sufficient notice that the defendants may answer intelligently.
Omissions of that sort instance the type of “bareness” with which the
Federal Rules are concerned. A plaintiff's inability to persuade a
district court that the allegations actually included in her complaint
are “plausible” is an altogether different kind of failing, and one
that should not be fatal at the pleading stage.
...
As in the discrimination context, we have developed an evidentiary
framework for evaluating claims under § 1 of the Sherman Act when
those claims rest on entirely circumstantial evidence of conspiracy.
See Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S.
574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Under Matsushita, a
plaintiff's allegations of an illegal conspiracy may not, at the
summary judgment stage, rest solely on the inferences that may be drawn
from the parallel conduct of the defendants. In order to survive a Rule
56 motion, a § 1 plaintiff “must present evidence ‘that tends to
exclude the possibility’ that the alleged conspirators acted
independently.' ” Id., at 588, 106 S.Ct. 1348. That is, the plaintiff
“must show that the inference of
conspiracy is reasonable in light of the competing inferences of
independent action or collusive action.” 475 U.S., at 588, 106 S.Ct.
1348.
Everything today's majority says would therefore make perfect sense if
it were ruling on a Rule 56 motion for summary judgment and the
evidence included nothing more than the Court has described. But it
should go without saying in the wake of Swierkiewicz that a heightened
production burden at the summary judgment stage does not translate into
a heightened pleading burden at the complaint stage. The majority
rejects the complaint in this case because-in light of the fact that
the parallel conduct alleged is consistent with ordinary market
behavior-the claimed conspiracy is “conceivable” but not “plausible,”
ante, at 1974. I have my doubts about the majority's assessment of the
plausibility of this alleged conspiracy. See Part III, infra. But even
if the majority's speculation is correct, its “plausibility” standard
is irreconcilable with Rule 8 and with our governing precedents. As we
made clear in Swierkiewicz and Leatherman, fear of the burdens of
litigation does not justify factual conclusions supported only by
lawyers' arguments rather than sworn denials or admissible evidence.
This case is a poor vehicle for the Court's new pleading rule, for we
have observed that “in antitrust cases, where ‘the proof is largely in
the hands of the alleged conspirators,’ ... dismissals prior to giving
the plaintiff ample opportunity for discovery should be granted very
sparingly.” Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S.
738, 746, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976).
Moreover, the fact that the Sherman Act authorizes the recovery of
treble damages and attorney's fees for successful plaintiffs indicates
that Congress intended to encourage, rather than discourage, private
enforcement of the law. It is therefore more, not less, important in
antitrust cases to resist the urge to engage in armchair economics at
the pleading stage.
The same year we decided Conley, Judge Clark wrote, presciently,
“I fear that every age must learn its lesson that special pleading
cannot be made to do the service of trial and that live issues between
active litigants are not to be disposed of or evaded on the paper
pleadings, i.e., the formalistic claims of the parties. Experience has
found no quick and easy short cut for trials in cases generally and
antitrust cases in particular.” Special Pleading in the “Big Case”? in
Procedure-The Handmaid of Justice 147, 148 (C. Wright & H. Reasoner
eds.1965) (hereinafter Clark, Special Pleading in the Big Case)
(emphasis added).
In this “Big Case,” the Court succumbs to the temptation that previous
Courts have steadfastly resisted. While the majority assures us that
it is not applying any “ ‘heightened’ ” pleading standard, see ante, at
1973, n. 14, I shall now explain why I have a difficult time
understanding its opinion any other way.
III
The Court does not suggest that an agreement to do what the plaintiffs
allege would be permissible under the antitrust laws. Nor does the
Court hold
that these plaintiffs have failed to allege an injury entitling them to
sue for damages under those laws. Rather, the theory on which the Court
permits dismissal is
that, so far as the Federal Rules are concerned, no agreement has been
alleged at all. This is a mind-boggling conclusion.
As the Court explains, prior to the enactment of the Telecommunications
Act of 1996 the law prohibited the defendants from competing with each
other. The new statute was enacted to replace a monopolistic market
with a competitive one. The Act did not merely require the regional
monopolists to take affirmative steps to facilitate entry to new
competitors; it also permitted the existing firms to compete with each
other
and to expand their operations into previously forbidden territory.
Each of the defendants decided not to take the
latter step. That was obviously an extremely important business
decision, and I am willing to presume that each company acted entirely
independently in reaching that decision. I am even willing to entertain
the majority's belief that any agreement among the companies was
unlikely. But the plaintiffs allege in three places in their complaint,
¶¶ 4, 51, 64, App. 11, 27, 30, that the ILECs did in fact
agree both to prevent competitors from entering into their local
markets and to forgo competition with each other. And as the Court
recognizes, at the motion to dismiss stage, a judge assumes “that all
the allegations in the complaint are true (even if doubtful in fact).”
Ante, at 1965.
The majority circumvents this obvious obstacle to dismissal by
pretending that it does not exist. The Court admits that “in form a few
stray statements in the complaint speak directly of agreement,” but
disregards those allegations by saying that “on fair reading these are
merely legal conclusions resting on the prior allegations” of parallel
conduct. Ante, at 1970. The Court's dichotomy between factual
allegations and “legal conclusions” is the stuff of a bygone era,
supra, at 1976 - 1977. That distinction was a defining feature of code
pleading, but was conspicuously abolished when the Federal
Rules were enacted in 1938.
“Defendants entered into a contract” is no more a legal conclusion than
“defendant negligently drove,” see Form 9; supra, at 1977. Indeed it is
less of one.FN9
FN9. The Court suggests that the allegation of an
agreement, even if credited, might not give the notice required by Rule
8 because it lacks specificity. Ante, at 1970 - 1971, n. 10. The remedy
for an allegation lacking sufficient specificity to provide adequate
notice is, of course, a Rule 12(e) motion for a more definite
statement. Petitioners made no such motion and
indeed have conceded that “[o]ur problem with the current complaint is
not a lack of specificity, it's quite specific.” Tr. of Oral Arg. 14.
Thus, the fact that “the pleadings mentioned no specific time, place,
or persons involved in the alleged conspiracies,” ante, at 1971, n. 10,
is, for our purposes, academic.
Even if I were inclined to accept the Court's anachronistic dichotomy
and ignore the complaint's actual allegations, I would dispute the
Court's suggestion that any inference of agreement from petitioners'
parallel conduct is “implausible.” Many years ago a truly great
economist perceptively observed that “[p]eople of the same trade seldom
meet together, even for merriment and diversion, but the conversation
ends in a conspiracy against the public, or in some contrivance to
raise prices.” A. Smith, An Inquiry Into the Nature and Causes of the
Wealth of Nations, in 39 Great Books of the Western World 55 (R.
Hutchins & M. Adler eds.1952). I am not so cynical as to accept
that sentiment at face value, but I need not do so here. Respondents'
complaint points not only to petitioners' numerous opportunities to
meet with each other, Complaint ¶ 46, App. 23, but also to
Notebaert's curious statement that encroaching on a fellow incumbent's
territory “might be a good way to turn a quick dollar but that doesn't
make it right,” id., ¶ 42, App. 22. What did he mean by that? One
possible (indeed plausible) inference is that he meant that while it
would be in his company's economic self-interest to compete with its
brethren, he had agreed with his competitors not to do so. According to
the complaint, that is how the Illinois Coalition for Competitive
Telecom construed Notebaert's statement, id., ¶ 44, App. 22
(calling the statement “evidence of potential collusion among regional
Bell phone monopolies to not compete against one another and kill off
potential competitors in local phone service”), and that is how Members
of Congress construed his company's behavior, id., ¶ 45, App. 23
(describing a letter to the Justice Department requesting an
investigation into the possibility that the ILECs' “very apparent
non-competition policy” was coordinated).
Perhaps Notebaert meant instead that competition would be sensible in
the short term but not in the long run. That's what his lawyers tell us
anyway. See Brief for Petitioners 36. But I would think that no one
would know better what Notebaert meant than Notebaert himself. Instead
of permitting respondents to ask Notebaert, however, the Court looks to
other quotes from that and other articles and decides that what he
meant was that entering new markets as a CLEC would not be a “
‘sustainable economic model.’ ” Ante, at 1972 - 1973, n. 13. Never mind
that-as anyone ever interviewed knows-a newspaper article is hardly a
verbatim transcript; the writer selects quotes to package his story,
not to record a subject's views for posterity. But more importantly the
District Court was required at this stage of the proceedings to
construe Notebaert's ambiguous statement in the plaintiffs' favor.
The inference the statement supports-that
simultaneous decisions by ILECs not even to attempt to poach customers
from one another once the law authorized them to do so were the product
of an agreement-sits comfortably within the realm of possibility. That
is all the Rules require.
To be clear, if I had been the trial judge in this case, I would not
have permitted the plaintiffs to engage in massive discovery based
solely on the allegations in this complaint. On the other hand, I
surely would not have dismissed the complaint without requiring the
defendants to answer the charge that they “have agreed not to compete
with one another and otherwise allocated customers and markets to one
another.” FN12 ¶ 51, App. 27. Even a sworn denial of that charge
would not justify a summary dismissal without giving the plaintiffs the
opportunity to take depositions from Notebaert and at least one
responsible executive representing each of the other defendants.
FN12. The Court worries that a defendant seeking to
respond to this “conclusory” allegation “would have little idea where
to begin.” Ante, at 1971, n. 10. A defendant could, of course, begin by
either denying or admitting the charge.
Respondents in this case proposed a plan of “ ‘phased discovery’ ”
limited to the existence of the alleged conspiracy and class
certification. Brief for Respondents 25-26. Two petitioners rejected
the plan. Ibid. Whether or not respondents' proposed plan was sensible,
it was an appropriate subject for negotiation.FN13 Given the charge in
the complaint-buttressed by the common sense of Adam Smith-I cannot say
that the possibility that joint discussions and perhaps some agreements
played a role in petitioners' decisionmaking process is so implausible
that dismissing the complaint before any defendant has denied the
charge is preferable to granting respondents even a minimal opportunity
to prove their claims.
FN13. The potential for “sprawling, costly, and
hugely time-consuming” discovery, ante, at 1967, n. 6, is no reason to
throw the baby out with the bathwater. The Court vastly underestimates
a district court's case-management arsenal. Before discovery even
begins, the court may grant a defendant's Rule 12(e) motion; Rule 7(a)
permits a trial court to order a plaintiff to reply to a defendant's
answer; and Rule 23 requires “rigorous analysis” to
ensure that class certification is appropriate. Rule 16 invests a trial
judge with the power, backed by sanctions, to regulate pretrial
proceedings via conferences and scheduling orders, at which the parties
may discuss, inter alia, “the elimination of frivolous claims or
defenses,” Rule 16(c)(1); “the necessity or desirability of amendments
to the pleadings,” Rule 16(c)(2); “the control and scheduling of
discovery,” Rule 16(c)(6); and “the need for adopting special
procedures for managing potentially difficult or protracted actions
that may involve complex issues, multiple parties, difficult legal
questions, or unusual proof problems,” Rule 16(c)(12). Subsequently,
Rule 26 confers broad discretion to control the combination of
interrogatories, requests for admissions, production requests, and
depositions permitted in a given case; the sequence in which such
discovery devices may be deployed; and the limitations imposed upon
them. Indeed, Rule 26(c)
specifically permits a court to take actions “to protect a party or
person from annoyance, embarrassment, oppression, or undue burden or
expense” by, for example, disallowing a particular discovery request,
setting appropriate terms and conditions, or limiting its scope.
In short, the Federal Rules contemplate that
pretrial matters will be settled through a flexible process of give and
take, of proffers, stipulations, and stonewalls, not by having trial
judges screen allegations for their plausibility vel non without
requiring an answer from the defendant. And should it become apparent
over the course of
litigation that a plaintiff's filings bespeak an in terrorem suit, the
district court has at its call its own in terrorem device, in the form
of a wide array of Rule 11 sanctions. See Rules 11(b), (c) (authorizing
sanctions if a suit is presented “for any improper purpose, such as to
harass or to cause unnecessary delay or needless increase in the cost
of litigation”).
I fear that the unfortunate result of the majority's new pleading rule
will be to invite lawyers' debates over economic theory to conclusively
resolve antitrust suits in the absence of any evidence. It is no
surprise that the antitrust defense bar-among whom “lament” as to
inadequate judicial supervision of discovery is most “common,” see
ante, at 1967-should lobby for this state of affairs. But “we must
recall that their primary responsibility is to win cases for their
clients, not to improve law administration for the public.” Clark,
Special Pleading in the Big Case 152. As we did in our prior decisions,
we should have instructed them that their remedy was to seek to amend
the Federal Rules-not our interpretation of them.
IV
Just a few weeks ago some of my colleagues explained that a strict
interpretation of the literal text of statutory language is essential
to avoid judicial decisions that are not faithful to the intent of
Congress. Zuni Public School Dist. No. 89 v. Department of Education,
550 U.S. ----, ----, 127 S.Ct. 1534, 167 L.Ed.2d 449 (2007) (SCALIA,
J., dissenting). I happen to believe that there are cases in which
other tools of construction are more reliable than text, but I agree of
course that congressional intent should guide us in matters of
statutory interpretation. Id., at 1534, 127 S.Ct. 1534 (STEVENS, J.,
concurring). This is a case in which the intentions of the drafters of
three important sources of law-the Sherman Act, the Telecommunications
Act of 1996, and the Federal Rules of Civil Procedure-all point
unmistakably in the same direction, yet the Court marches resolutely
the other way. Whether the Court's actions will benefit only defendants
in antitrust treble-damages cases, or whether its test for the
sufficiency of a complaint will inure to the benefit of all civil
defendants, is a question that the future will answer. But that the
Court has announced a significant new rule that does not even purport
to respond to any congressional command is glaringly obvious.
The transparent policy concern that drives the decision is the interest
in protecting antitrust defendants-who in this case are some of the
wealthiest corporations in our economy-from the burdens of pretrial
discovery. Ante, at --- - ----11-13. Even if it were not apparent that
the legal fees petitioners have incurred in arguing the merits of their
Rule 12(b) motion have far exceeded the cost of limited discovery, or
that those discovery costs would burden respondents as well as
petitioners, that concern would not provide an adequate
justification for this law-changing decision. For in the final analysis
it is only a lack of confidence in the ability of trial judges to
control discovery, buttressed by appellate judges' independent
appraisal of the plausibility of profoundly serious factual
allegations, that could account for this stark break from precedent.
If the allegation of conspiracy happens to be true, today's decision
obstructs the congressional policy favoring competition that undergirds
both the Telecommunications Act of 1996 and the Sherman Act itself.
More importantly, even if there is abundant evidence that the
allegation is untrue, directing that the case be dismissed without even
looking at any of that evidence marks a fundamental-and
unjustified-change in the character of pretrial practice.
Accordingly, I respectfully dissent.