Bell Atlantic Corp. v. Twombly

Facts

The 1984 divestiture of AT&T's local telephone business left a system of regional monopolies, the Baby Bells, also called Incumbent Local Exchange Carriers (ILECs). The ILECs were kept out of the long-distance market. Congress withdrew approval of those monopolies in the Telecommunications Act of 1996. The Act required each ILEC to share its network with new rivals, called competitive local exchange carriers (CLECs), and set conditions for letting ILECs into long distance. William Twombly and Lawrence Marcus sued a group of ILECs for a putative (proposed) class of local telephone and high-speed internet subscribers. They sought treble damages and declaratory and injunctive relief under section 1 of the Sherman Act, which reaches a contract, combination or conspiracy in restraint of trade. The complaint described two patterns. First, it alleged that each ILEC resisted the CLECs in its own area through unfair network-access deals, inferior connections, overcharging and billing meant to sabotage the CLECs' customer relations. Second, it alleged that no ILEC meaningfully pursued attractive opportunities in a neighboring ILEC's market. The complaint quoted Richard Notebaert, chief executive of the ILEC Qwest, as saying that competing in another ILEC's territory "might be a good way to turn a quick dollar but that doesn't make it right." On those allegations, the complaint asserted upon information and belief that the ILECs had agreed to keep competitors out and not to compete with one another.

Issues

1. Does a section 1 Sherman Act complaint survive a motion to dismiss when it alleges parallel conduct by competitors but no factual context suggesting agreement, as distinct from identical, independent action?
2. Does Conley v. Gibson's statement that a complaint should not be dismissed unless the plaintiff can prove no set of facts entitling him to relief set the minimum standard for pleading under Rule 8(a)(2)?

Holding

The complaint failed to state a section 1 claim. It rested on parallel conduct and conclusory assertions of agreement, and nothing in it plausibly suggested a conspiracy rather than each ILEC's natural, independent pursuit of its own interests. Conley's "no set of facts" language is retired: it described what a plaintiff may prove once a claim is adequately stated, not the minimum a complaint must plead to survive.