In an unsigned summary order in Wacker v. JP Morgan Chase & Co.,[1] a Second Circuit panel (Judges Cabranes, Pooler and Lynch) overturned dismissal of an antitrust suit brought by a group of precious metals traders and a hedge fund alleging that JP Morgan unlawfully monopolized the market for silver futures in violation of the Sherman Act.

The panel concluded that the Southern District of New York Judge should not have dismissed the complaint for insufficient specificity in the facts that were pleaded, adding that the district court judge also engaged in impermissible fact-finding at the pleading stage. In doing so, the Second Circuit panel explained the level of details required in factual allegations in that Circuit for a complaint to adequately state a claim for relief that is plausible on its face under the standard adopted by the Supreme Court in Iqbal[2] and Twombly.[3]

Under the Supreme Court’s pleading standard, to survive a motion to dismiss under Federal Rule 12(b)(6), a complaint must plead “enough facts to state a claim to relief that is plausible on its face.”[4] A complaint has “facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”[5] “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”[6] Moreover, quoting Twombly, the Second Circuit has previously emphasized that “the complaint’s factual allegations must be enough to raise the right to relief above the speculative level, i.e., enough to make the claim plausible.”[7]

The plaintiffs in Wacker alleged in their amended complaint that a named JP Morgan representative unlawfully exercised JP Morgan’s monopoly power in the market for silver futures by manipulating the prices of silver futures spreads through the placement of large artificial and unrealistic bids on the Commodities Exchange trading floor on at least fourteen dates in February 2011. This allegedly drove down silver futures prices to the benefit of JP Morgan’s position. This allegedly artificial price movement caused a rare result: silver delivered sooner cost more than silver delivered later in time. According to plaintiffs, this put undue pressure on their positions in the silver futures market to the point that they were ultimately forced to liquidate.[8]

The District Court's Dismissal for Failure to State a Plausible Claim.

District Court Judge Paul Engelmayer dismissed the repleaded complaint without granting further leave to amend. He declared that the allegations relating to the applicable transactions were still conclusory because they lacked alleged facts as to when the challenged transactions occurred, the identity of the other parties involved in the transactions, the amounts of the allegedly artificial bids, or the amount of the outsized profit JP Morgan allegedly reaped.[9] He characterized the claim as an unsubstantiated ‘ipse dixit’ that the transactions at issue were uneconomic and without any legitimate justification.[10]

The District Court Judge also supported his dismissal ruling on the ground that the plaintiffs had failed to explain in their amended complaint why they relied on a 12-month benchmark to determine what bid/ask spreads should have been in the silver futures market. According to the District Court, that 12-month benchmark could not plausibly be used with respect to the futures spreads at issue, which reflected expectations three years in the future.[11] Plaintiffs had argued that the 12-month benchmark was the best available, but the District Court responded that this “falls far short of adequately pleading that it survives the acid test” of rational pricing to the point that the divergent price quotes at issue “would give rise to an inference of irrational or uneconomic pricing” sufficient to support a plausible monopolization claim. [12]

Accordingly, the district court concluded that plaintiffs failed plausibly to allege the elements of “willful acquisition or maintenance of monopoly power” and “anticompetitive conduct” required to state a monopolization claim under Section 2 of the Sherman Act. Specifically, plaintiffs had not sufficiently pleaded that JP Morgan intended to rig the market, or had even made “uneconomic bids” in the first instance.[13]

The Second Circuit Panel Decision Reversing Dismissal

On appeal, the Second Circuit panel disagreed in its Summary Order with each of the District Court’s key determinations. After summarizing the Iqbal/Twombly plausibility pleading standard, the appellate panel ruled that the District Court had demanded a level of detail not required to withstand a motion to dismiss; detailed factual allegations are not required.

According to the panel, a plaintiff need only allege enough facts “to raise a right to relief above the speculative level.”[14] The District Court went too far by requiring plaintiffs to concretely recite what the bids/asks were, or to allege their amounts. It was sufficient to specify fourteen days when JP Morgan allegedly submitted transactions that exceeded the value of the silver futures’ economic outputs. "[W]illingness to forsake short-term profits to achieve an anticompetitive end is indicative of anticompetitive conduct.” Accordingly, accepting all of plaintiffs’ alleged facts as true, as required in reviewing a Rule 12(b)(6) dismissal motion, the stated dates and transactions were sufficiently detailed to allege exclusionary conduct at the pleading stage.[15]

Moreover, the panel emphasized, plaintiffs were not required to state the identity of the other parties to the transactions at issue or the amount of the alleged outsized profit that JP Morgan reaped. They needed only to “raise a reasonable expectation that discovery will reveal evidence of illegality.”[16] The allegation that JP Morgan attempted to influence prices by placing uneconomic bids spoke to anticompetitive intent, and therefore adequately pleaded “willful acquisition or maintenance of monopoly power,” as required to plead a monopolization violation of Section 2 of the Sherman Act.[17]

Significantly, the appellate panel also declared that the District Court engaged in improper fact-finding at the pleading stage by rejecting the plaintiffs’ use of a twelve-month industry benchmark as determining the proper levels for the bid/ask spreads involved the case. The panel stressed that assessing the choice of a benchmark involves an “inherently fact-intensive inquiry,” and fact-specific questions cannot be resolved on the pleadings.[18]

Finally, the Second Circuit panel flatly rejected JP Morgan’s argument that the District Court improperly accepted as plausible the plaintiffs’ proposed market of long-dated silver futures contracts at the motion to dismiss stage. Relying on Second Circuit precedent, the panel declared: “Because market definition is a deeply fact-intensive inquiry, courts hesitate to grant motions to dismiss for failure to plead a relevant product market.”[19]


Hopefully, the Wacker decision now makes three pleading requirements for antitrust cases clear in the Second Circuit. First, at the outset, the panel repeated the admonition that “there is no heightened pleading standard in antitrust cases.”[20] Second, to allege a plausible claim, a plaintiff need only plead enough facts to raise its right to relief above the speculative level. The fact that other conclusions might be more plausible is of no matter at the pleading stage, so long as the claim that is made is more than speculative. Third, as to specificity, the allegations need only raise a reasonable expectation that discovery will reveal evidence of illegality.

Moreover, as stressed by the Wacker panel, in rule of reason cases, a court must give due credence to the fact that market definition is a “deeply fact intensive inquiry,” making the grant of a dismissal motion for failure to plead a plausible relevant market a rarity.