Can parallel conduct allegations alone, without additional contextual facts suggesting collusion, sufficiently state a claim under Section 1 of the Sherman Act?

William Twombly and Lawrence Marcus, representing a putative class of local telephone and high-speed internet subscribers, filed a complaint against major telecommunications providers (ILECs) for alleged violations of Section 1 of the Sherman Act. The plaintiffs claimed that the ILECs engaged in parallel conduct to impede competition from new market entrants (CLECs) and agreed not to compete in each other's markets. The alleged parallel conduct included making unfair agreements with CLECs, providing inferior network connections, overcharging, and sabotaging customer relations.

The complaint cited a statement by Qwest's CEO, Richard Notebaert, suggesting that competing in another ILEC's territory might be profitable but "doesn't make it right." The plaintiffs argued that the ILECs' behavior indicated a conspiracy, given their shared motivation to hinder CLEC competition. These allegations formed the basis of the antitrust complaint against the telecommunications providers.

Bell Atlantic Corp. (plaintiff) filed a complaint in the United States District Court for the Southern District of New York. The District Court dismissed the complaint for failure to state a claim upon which relief could be granted. Bell Atlantic Corp. appealed this decision to the Court of Appeals for the Second Circuit. The Court of Appeals reversed the District Court's ruling, determining that the lower court had applied an incorrect standard in evaluating the complaint. Following this reversal, the defendants petitioned the Supreme Court for certiorari. The Supreme Court granted certiorari to address the proper standard for pleading an antitrust conspiracy through allegations of parallel conduct.

(Souter, J.)

No. Parallel conduct allegations alone are insufficient to state a claim under Section 1 of the Sherman Act. A complaint must contain enough factual matter to suggest that an agreement was actually made. Mere parallel behavior, even if consciously undertaken, falls short of the threshold requirement. The pleading standard demands more than labels, conclusions, or a formulaic recitation of the elements of a cause of action. Factual allegations must be enough to raise a right to relief above the speculative level. This plausibility standard requires a complaint to plead facts that allow the court to draw a reasonable inference of liability. The plaintiff must provide "plausible grounds" to infer an agreement, not merely possible grounds. This heightened pleading requirement serves to prevent unwarranted litigation expenses on defendants facing meritless claims. Allowing bare assertions of conspiracy, without more, would subject companies to potentially massive and costly discovery, even where there is no reasonable likelihood of an unlawful agreement. The Sherman Act does not prohibit independent parallel conduct or even conscious parallelism. To establish a § 1 violation, there must be a "contract, combination, or conspiracy." Thus, allegations of parallel conduct must be placed in a context that raises a plausible suggestion of a preceding agreement, not merely consistent with a conspiracy. This standard strikes a balance between providing fair notice to defendants and preventing wasteful, expensive litigation on implausible claims.

Dissent (Stevens, J.) The complaint's straightforward allegation of a conspiracy should have been sufficient to survive a motion to dismiss. The Court's new "plausibility" standard is inconsistent with Rule 8 of the Federal Rules of Civil Procedure and our prior decisions. This departure from settled procedural law imposes an unwarranted burden on plaintiffs at the pleading stage. The majority's approach risks prematurely terminating valid antitrust claims and undermines the role of discovery in uncovering evidence of conspiracy.

Concurrence (Ginsburg, J.) Concurred with Justice Stevens' dissent, except for Part IV, without providing a separate written opinion.