Does a complaint alleging parallel conduct by competitors under Section 1 of the Sherman Act survive a motion to dismiss when it lacks factual allegations that make an agreement plausible rather than merely conceivable?

Respondents William Twombly and Lawrence Marcus represented a putative class of all subscribers of local telephone and high-speed internet services from February 8, 1996 to the present. Petitioners were incumbent local exchange carriers (ILECs): BellSouth, Qwest, SBC, and Verizon (successor to Bell Atlantic), successors to the regional monopolies created by the 1984 AT&T divestiture. The Telecommunications Act of 1996 ended the ILECs' local monopolies and required them to share their networks with competitive local exchange carriers (CLECs). Plaintiffs alleged the ILECs conspired in restraint of trade in two ways. First, they engaged in parallel conduct to inhibit CLEC growth, including unfair interconnection agreements, inferior network access, overcharging, and sabotaging CLEC billing relationships. Second, they allegedly agreed not to compete against one another in neighboring territories, inferred from their failure to pursue attractive opportunities in contiguous markets and from a statement by Qwest CEO Richard Notebaert that competing in another ILEC's territory 'might be a good way to turn a quick dollar but that doesn't make it right.' The complaint also alleged generally that the ILECs entered into a contract, combination, or conspiracy and agreed not to compete. Plaintiffs sought treble damages and declaratory and injunctive relief.

Plaintiffs filed suit in the United States District Court for the Southern District of New York, which dismissed the complaint for failure to state a claim. The District Court held that allegations of parallel conduct alone do not state a Section 1 claim and that plaintiffs must allege additional facts tending to exclude independent self-interested conduct as an explanation. The Second Circuit reversed, holding that plus factors need not be pleaded and that dismissal is proper only if there is no set of facts permitting a plaintiff to show the parallelism was the product of collusion rather than coincidence. The Supreme Court granted certiorari to address the proper pleading standard for an antitrust conspiracy based on parallel conduct.

(Souter, J.)

No. A Section 1 complaint relying on parallel conduct must contain enough factual matter, taken as true, to suggest that an agreement was made. Allegations that are merely consistent with agreement do not suffice; the facts must plausibly suggest it.

Section 1 reaches only restraints effected by contract, combination, or conspiracy. Parallel conduct, even conscious parallelism, is not itself unlawful, because it is just as consistent with independent business decisions prompted by common perceptions of the market. Theatre Enterprises v. Paramount Film Distributing Corp., 346 U.S. 537 (1954); Brooke Group v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993). Courts demand more than parallelism at the directed verdict and summary judgment stages. Monsanto Co. v. Spray-Rite Service Corp., 465 U.S. 752 (1984); Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574 (1986).

Rule 8(a)(2) requires a showing of entitlement to relief. Detailed factual allegations are unnecessary, but a plaintiff must provide more than labels, conclusions, and a formulaic recitation of the elements, and the factual allegations must raise a right to relief above the speculative level. A plausibility requirement is not a probability requirement; it calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of agreement. The potentially enormous cost of antitrust discovery justifies requiring plausibility at the pleading stage, since judicial case management and summary judgment are inadequate to prevent settlement pressure from meritless claims. Dura Pharmaceuticals v. Broudo, 544 U.S. 336 (2005); Associated Gen. Contractors v. Carpenters, 459 U.S. 519 (1983).

The 'no set of facts' language in Conley v. Gibson, 355 U.S. 41 (1957), is retired as an incomplete, negative gloss on the pleading standard; it describes the breadth of facts that may support an adequately pleaded claim, not the minimum pleading standard.

Applied here, the complaint rests on parallel conduct, and its few direct references to agreement are legal conclusions. The ILECs' resistance to CLEC entry is the natural, unilateral reaction of each firm defending its territory, and their failure to compete in each other's territories has an obvious alternative explanation: former monopolists content with their legacy markets. The complaint does not nudge the claim from conceivable to plausible and is dismissed. Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002), is not to the contrary because no heightened fact-pleading requirement is imposed.

Dissent (Stevens, J., joined by Ginsburg, J., except as to Part IV) The Federal Rules require only a short and plain statement giving notice of the claim, and a judge ruling on a motion to dismiss must accept the complaint's factual allegations as true. The complaint expressly alleges that the ILECs agreed not to compete with one another and to keep out competitors, and it cites circumstantial support including Notebaert's statement and trade association meetings. The majority's distinction between facts and legal conclusions revives code pleading, which the Federal Rules abolished, and its plausibility test improperly lets judges weigh the likelihood of the ultimate allegation at the pleading stage. Conley's 'no set of facts' standard has been cited by this Court and relied upon by many state courts for decades, and no party asked that it be retired. The majority answered that both the ILECs and the Government criticized a literal reading of Conley and sought clarification of the standard. Swierkiewicz and Leatherman confirm that concerns about discovery burdens are addressed through case management, summary judgment, and amendment of the Rules, not by raising pleading requirements. The majority answered that case management is no answer and that discovery expense pushes defendants to settle before summary judgment. Dismissal without even requiring an answer is especially inappropriate in antitrust cases where proof lies largely in the defendants' hands. The ILECs' parallel inaction is consistent with the alleged agreement, and the inference of agreement is plausible.