Tuesday, April 6, 2010
Posted by D. Daniel Sokol
Aaron S. Panner (Kellogg, Huber, Hansen, Todd, Evans, & Figel) argues The Second Circuit’s Starr Decision: Why Twombly Demands More.
ABSTRACT: In Starr v. Sony BMG Music Entertainment, plaintiffs alleged that Sony BMG, EMI, Universal Music Group, and Warner Music Group—which allegedly "control over 80 percent of Digital Music sold to end purchasers in the United States" --had engaged in a conspiracy to maintain high prices for music sold over the Internet. Before 2007, the defendants might well have declined even to challenge the legal adequacy of that allegation. But, in 2007, the Supreme Court decided Twombly, which changed the analysis that applies to antitrust conspiracy claims. The Starr defendants filed a motion to dismiss, arguing that plaintiffs' allegations did not satisfy Twombly. The district court agreed, but the Second Circuit reversed. The Second Circuit held that the standard developed in the summary judgment context for evaluating the adequacy of circumstantial evidence of a Section 1 conspiracy should not be transposed to the motion-to-dismiss context. But the Second Circuit's decision, by allowing a vague set of factual allegations and an equally vague set of claimed violations to proceed past a motion to dismiss, ignored Twombly's most basic lesson: An antitrust plaintiff, in the absence of any direct claim of agreement, must support a claim of conspiracy with clear factual allegations and persuasive inferences.