Chocolate Price-Fixing Case Certified for Appeal to Federal Appeals Court
A federal court in Pennsylvania has certified for immediate appeal its denial of the defendants’ motion to dismiss in multidistrict litigation (MDL) alleging price-fixing by chocolate manufacturers. In re Chocolate Confectionary Antitrust Litig., MDL No. 1935 (M.D. Pa., April 8, 2009).
The defendants in these 87 consolidated lawsuits reportedly supply 75 percent of the chocolate candy consumed by Americans each year. The lawsuits allege that the companies conspired to raise prices in 2002, 2004 and 2007 by as much as 10 percent and rely on information generated by government investigations in the United States and Canada to bolster their conspiracy allegations. At least one company spokesperson has been quoted as saying, “You can’t just infer the existence of a price-fixing conspiracy from the fact that independent competitors in concentrated industries independently choose to raise their prices.”
The question certified to the Third Circuit Court of Appeals is whether the U.S. Supreme Court’s ruling in Bell Atlantic Co. v. Twombly, 550 U.S. 544 (2007), which established a new standard for pleading in antitrust cases, authorizes “a court in a [price-fixing conspiracy] case to draw an inference of conspiracy from the collective effect of repeated parallel price increases, averments of anticompetitive activity in closely related foreign markets, transnational management of corporate subsidiaries, opportunity for collusion, and descriptions of anti-competitive conduct that are economically sensible in light of mature market characteristics.”
The district court notes in the memorandum accompanying its grant of defendants’ interlocutory appeal that Twombly arguably presents “varied analytical cues” that “expose it to multiple interpretations.” Before Twombly, a court asked to dismiss a complaint for failure to state a claim would not dismiss the complaint “unless it appear[ed] beyond doubt that the plaintiff c[ould] prove no set of facts in support of his claim which would entitle him to relief.” While Twombly rejected a requirement of “heightened fact pleading of specifics,” it did require plaintiffs to set forth plausible averments that possess “enough heft to ‘sho[w] that the pleader is entitled to relief.’” The U.S. Supreme Court has refined this standard since Twombly was decided and reaffirmed that “a complaint must simply ‘give the defendant fair notice of what
the . . . claim is and the grounds upon which it rests.’”
According to the court, “a narrow reading of Twombly construes it as a formalistic change designed to give voice to a pleading standard that was already commonplace in many courts. Under a robust interpretation, however, Twombly requires a court to scrutinize the plausibility of a complaint’s allegations and dismiss claims that lack sufficient factual underpinning for the relief requested.”
Because the Third Circuit has not yet applied Twombly in the context of antitrust claims, and because antitrust “plaintiffs often lack direct evidence of a conspiratorial agreement and must rely upon circumstantial allegations to surmount a Rule 12(b)(6) challenge,” the court determined that an immediate appeal giving the appeals court the opportunity to explore Twombly’s parameters was warranted. Still, the court reiterated its belief that it correctly denied defendants’ motion to dismiss. In its order, the court directs that jurisdictional discovery continue during the pendency of any appeal accepted by the Third Circuit. See The American Lawyer, April 13, 2009.
