Bringing an Antitrust Suit Alleging an Illegal “Agreement” is More Difficult Than You Think, But Not as Difficult as Massachusetts District Court Judge Stearns Made It

by Lee Gesmer on June 25, 2013

If you want to bring an antitrust suit based on an illegal agreement among competitors (say, a boycott), you face a possible Catch-22: you can’t get the evidence you need to prove an illegal agreement until you file the suit (and conduct discovery), but you can’t file an antitrust suit unless you are able to provide sufficient evidence of the agreement in your complaint.

This is the problem the plaintiff faced in Evergreen Partnering Group v. Forrest, decided by the First Circuit on June 19th. Evergreen alleged that the defendants (a small group of companies that controlled the disposable plastics industry) refused in concert to deal with it—in other words, they boycotted Evergreen.

Massachusetts federal district court judge Richard Stearns dismissed the case on the complaint, holding that Evergreen had failed to plead a viable claim of conspiracy to boycott. In other words, the complaint didn’t contain enough “facts” to establish, directly or through inference, that the defendants had entered into an agreement to boycott. For example, each of the defendants could have acted alone (unilaterally), and if so there would be no antitrust violation. Evergreen was caught in the antitrust pleading “Catch 22.”

The First Circuit reversed, remanding the case to the district court for further proceedings. Interpreting the Supreme Court’s 2007 decision in Bell Atlantic v. Twombly (an antitrust case in which the Supreme Court issued an important decision establishing a “plausibility” pleading standard, as opposed to the long-standing “notice” standard), the First Circuit stated:

Twombly is therefore clear that, if no direct evidence of agreement is alleged, it is insufficient to exclusively allege parallel conduct at the pleadings stage. Rather, a complaint must at least allege the general contours of when an agreement was made, supporting those allegations with a context that tends to make said agreement plausible. … we have made clear that plaintiffs must establish that it is plausible that defendants are engaged in more than mere conscious parallelism, by pleading and later producing evidence pointing toward conspiracy. … It is also clear that allegations contextualizing agreement need not make any unlawful agreement more likely than independent action nor need they rule out the possibility of independent action at the motion to dismiss stage. Requiring such heightened pleading requirements at the earliest stages of litigation would frustrate the purpose of antitrust legislation and the policies informing it.

Evergreen met this standard, and therefore it will be allowed to proceed with its case. Whether it can come up with enough evidence to survive the next hurdle—summary judgment—and take its case to a jury, remains to be seen.

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