Bell Atlantic Corp. v. Twombly

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. . . .


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, which “fundamentally restructure[d] local telephone markets” and “subject[ed] [ILECs] to a host of duties intended to facilitate market entry.” . . .

“Central to the [new] scheme [was each ILEC's] obligation ... to share its network with competitors,” . . . which came to be known as “competitive local exchange carriers” (CLECs). 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.” . . . Owing to the “considerable expense and effort” required to make unbundled network elements available to rivals at wholesale prices, . . . the ILECs vigorously litigated the scope of the sharing obligation imposed by the [Telecommunications Act of 1996], 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.” . . . 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, . . . 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. . . . 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. 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.” . . .

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,” . . . 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,’ ” . . .

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.” . . .

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 Court of Appeals for the Second Circuit reversed, holding that the District Court tested the complaint by the wrong standard. . .

We granted certiorari to address the proper standard for pleading an antitrust conspiracy through allegations of parallel conduct, . . . and now reverse.


II

[. . .]

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. . . . 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, . . . [Footnote 3] on the assumption that all the allegations in the complaint are true (even if doubtful in fact). . . .

=====FOOTNOTE 3=====

The dissent greatly oversimplifies matters by suggesting that the Federal Rules somehow dispensed with the pleading of facts altogether. . . . 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, . . . , 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. . . .

=====Footnote End=====

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. . . .

[. . .]

We alluded to the practical significance of the Rule 8 entitlement requirement in Dura Pharmaceuticals, Inc. v. Broudo, . . . 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.’ ” . . . . 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.’ ” . . . .

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, . . . “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.

[. . .]

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.” . . . 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 . . . .

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. . . . 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. . . .

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.

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. 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.” . . . 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.

[. . .]

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. [Footnote 14]

=====FOOTNOTE 14=====

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. . . . 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. . . . Here, our concern is not that the allegations in the complaint were insufficiently “particular[ized]”, rather, the complaint warranted dismissal because it failed in toto to render plaintiffs' entitlement to relief plausible.

=====Footnote End=====

[. . .]

Here . . . we 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. . . . 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., . . . 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. . . .

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.

[. . .]

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 decision-making. 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. . . .