In Evergreen Partnering Group Inc. et al. v. Pactiv Corp. et al., the U.S. Court of Appeals for the First Circuit held that in a refusal-to-deal case a plaintiff can survive a motion to dismiss by alleging the basic contours of a plausible conspiracy. The plaintiff alleged that a group of defendants conspired not to deal with it because it had developed a system to recycle food service trays that threated their businesses. The appellate court concluded that the trial court, by considering the defendant’s contention that it unilaterally decided not to deal with the plaintiff, improperly applied at the pleading stage a standard that would be applicable only on summary-judgment or post-trial.
The First Circuit stressed that lower courts were applying the Supreme Court’s Twombly decision too strictly. The court cautioned trial courts not to rely on “case law evaluating antitrust claims at the summary judgment and post-trial stages,” when determining whether a pleading is adequate to survive a motion to dismiss.
On the merits, the court explained that the trial court correctly recognized that allegations of parallel conduct alone are insufficient to support a conspiracy allegation. At the pleading stage, however, the court should not rely on the defendant’s claim that the case rests on parallel conduct when the plaintiff has provided context for an illegal agreement.
In the case before it, the First Circuit explained that Evergreen provided the necessary context by alleging that (1) in late 2005 or 2006 the defendants met and agreed that recycled polystyrene products threatened their business model, and (2) anti-competitive behavior followed this meeting. The trial court erred in (1) drawing inferences in favor of the defendant that directly conflicted with allegations in the complaint and (2) demanding more “highly specific details as to how the alleged conspirators communicated with each other, the individuals who were involved, when the communications took place, the substance of their contents, and the dramatic switch in business practices that followed.” Although the First Circuit acknowledged that “each of Evergreen’s allegations of circumstantial agreement standing alone may not be sufficient to imply agreement,” it concluded that “taken together, they provide a sufficient basis to plausibly contextualize the agreement necessary for pleading.”