Decision
The Supreme Court reversed the decision of the Second Circuit, which had reversed the decision of the district court dismissing the complaint for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure.
As an initial matter, the Supreme Court clarified the requirements of proving a claim of anti-competitive behavior under Section 1 of the Sherman Act. The Sherman Act prohibits entering into a "contract, combination, or conspiracy" to restrain trade. The court held that while parallel conduct (actions by competing companies that might be seen as implying some agreement to work together) is "admissible circumstantial evidence" from which an agreement to engage in anti-competitive behavior may be inferred, parallel conduct alone is insufficient to prove a Sherman Act claim.
The court then upheld the district court's dismissal of the plaintiff's complaint, holding that the mere allegations contained in the complaint that the competitors had agreed not to compete were insufficient to state a claim of conspiracy under the Sherman Act. The court found that Twombly's complaint had not provided enough facts to find it plausible that the companies had engaged in a conspiracy; instead, the complaint provided only a factual basis for parallel conduct, which was not enough under the court's new interpretation of the Sherman Act, and alleged only that an agreement had been made, with no details to support that allegation. The court held that the dismissal of the complaint was therefore proper.
The decision changed the existing interpretation of the notice pleading requirements of Federal Rule of Civil Procedure 8(a)(2) and the standards for dismissal under Federal Rule of Civil Procedure 12(b)(6) by creating a new, stricter standard of a pleading's required specificity.
Previously, under the standard the court set forth in Conley v. Gibson, a complaint needed to state only a "conceivable" set of facts to support its legal claims. In other words, a court could not dismiss claims unless it appeared, beyond a reasonable doubt, that plaintiffs would be able to prove no set of facts in support of their claims that would entitle them to relief. In Twombly, the court adopted a stricter "plausibility" standard that required "enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of illegal agreement."
The Twombly test, however, remained vague, and the legal establishment was stumped as how to interpret the "plausibility" standard, even though it was not supposed to be a heightened pleading standard, as the Court said in footnote 14.[3] The general applicability of the test outside of antitrust cases was established in Ashcroft v. Iqbal, when the court provided guidance as to how lower courts should apply the test:"Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions... Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. In keeping with these principles a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief. Our decision in Twombly illustrates the two-pronged approach."
The two cases are often jointly referred to as Twiqbal.
The case was argued by Michael K. Kellogg of law firm Kellogg, Huber, Hansen, Todd, Evans & Figel and Thomas O. Barnett, Assistant Attorney General of the United States Department of Justice Antitrust Division, on behalf of the United States as amicus curiae for the petitioners.[6]
Twombly remains controversial as of 2020. Not only did it overturn Conley v. Gibson, but it also overturned Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U.S. 163 (1992). Leatherman had unanimously established that the heightened pleading standard was fundamentally at odds with the Federal Rules of Civil Procedure, and the court opined that the only way to change the standard would be to amend the Rules. The Court had further cemented this idea with another unanimous ruling in Swierkiewicz v. Sorema, N.A., 534 U.S. 506 (2002), making Twombly all the more surprising.[3]
