Judge William S. Duffey, Jr. of the Northern District of Georgia recently dismissed a complaint brought by direct purchasers of less-than-truckload ("LTL") freight services alleging that defendants, LTL carriers, conspired to fix fuel surcharges from 2003 to 2007. In re LTL Shipping Servs. Antitrust Litig., No. 1:08-MD-01895-WSD (N.D. Ga. filed Jan. 28, 2009). Judge Duffey held that plaintiffs' complaint did not contain sufficient factual allegations to support a plausible inference of conspiracy under Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955 (2007). In an insightful 49-page opinion, Judge Duffey synthesized and applied post-Twombly federal court decisions that have shaped the new pleading standard in antitrust cases.
Judge Duffey distilled four key insights from post-Twombly opinions that guided his analysis:
(1) A complaint alleging an antitrust conspiracy based on circumstantial evidence "must plead facts plausibly suggesting that parallel conduct was caused by an agreement, not merely that parallel conduct could just as well have been caused by independent action." In re LTL at 25.
(2) "[F]or allegations of conspiracy to reach the plausibility threshold required by Twombly, they often must include factual allegations such as the specific time, place, and persons involved in the conspiracy alleged." Id. at 26.
(3) Allegations of conspiracy can also reach Twombly's plausibility threshold by alleging "complex and historically unprecedented changes in pricing structure made at the very same time by multiple competitors, and made for no other discernible reason." Id. at 28-29, quoting Twombly, 127 S. Ct. at 1965 n. 4.
(4) Finally, Twombly's plausibility threshold is "rooted in the practical reality that in large antitrust cases the discovery process can be enormously expensive," and courts must ensure that allegations rise to this threshold before "subjecting antitrust defendants to potentially massive discovery proceedings." Id. at 30.
Applying these principles, Judge Duffey held that plaintiffs' allegations failed to meet Twombly's plausibility threshold and dismissed the complaint.
Judge Duffey held that defendants' alleged increases in fuel surcharges could be explained plausibly by independent responses to increases in diesel fuel prices. Id. at 39-45. Furthermore, similarities in defendants' fuel surcharges and high profit margins could also be explained plausibly by independent conduct since the complaint described an oligopoly market for homogenous LTL services that "would have motivated the LTL carriers to each set exactly the same fuel surcharges." Id. at 45-46. Therefore, the factual allegations of the complaint did not plausibly suggest a conspiracy.
Judge Duffey also held that the complaint failed to state a claim under Twombly because it lacked any specific allegations regarding when or where the agreement was reached. Plaintiffs alleged that the defendants had numerous opportunities to conspire at trade association meetings, but never alleged that any of the defendants attended the meetings or had other communications through which they might have established an agreement. Id. at 38. Moreover, the complaint did not contain sufficiently specific factual allegations regarding the time frame when the alleged agreement was defined. Id. at 43-45. Instead, the complaint alleged a conspiracy period lasting from 2003 to 2007, but only contained factual allegations going back to May 2007. Id.
Plaintiffs also failed to meet Twombly's plausibility threshold because, as Judge Duffey noted, the complaint did not allege that the defendants' fuel surcharges were "historically unprecedented." Id. On the contrary, the factual allegations in the complaint indicated that defendants had used fuel surcharges for decades, and increased those fuel surcharges beginning in 1999 as the price of diesel fuel increased. Id.
In conclusion, Judge Duffey held that "Plaintiffs' allegations do not show enough facts for the Court to find that agreement was plausible. What the allegations show instead is that all LTL service providers had the same incentives to charge the same shipping rates, and that over time they eventually each did so." Id. at 47.
Judge Duffey granted plaintiffs an opportunity to amend their complaint by March 16, 2009, and provided a strong hint to plaintiffs regarding the allegations he expected to see if and when plaintiffs did so: "Without more specific allegations of an agreement, such as historical fuel surcharges showing coordinated pricing decisions within a limited defined date range, and not caused by common individual reactions to sharp fuel price increases, the Court cannot find that an agreement was the plausible reason for the Defendants' decisions." Id. at 47.