Petition for Writ of Certiorari — Audubon Imports, LLC, dba Mercedes Benz of Baton Rouge, et al., Petitioners v. Bayerische Motoren Werke Aktiengesellschaft (BMW AG), et al.

Supreme Court briefApr 22, 2022

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No. _________

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In The

Supreme Court of the United States

---------------------------------♦--------------------------------AUDUBON IMPORTS, LLC d/b/a

Mercedes Benz of Baton Rouge, et al.,

Petitioners,

BAYERISCHE MOTOREN WERKE

AKTIENGESELLSCHAFT, (BMW AG), et al.,

Respondents.

---------------------------------♦--------------------------------On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

---------------------------------♦--------------------------------PETITION FOR WRIT OF CERTIORARI

---------------------------------♦--------------------------------WARREN T. BURNS

KYLE K. OXFORD

BURNS CHAREST, LLP

900 Jackson Street, Suite 500

Dallas, TX 75202

Telephone: (469) 904-4550

wburns@burnscharest.com

koxford@burnscharest.com

CHRISTOPHER J. CORMIER

Counsel of Record

BURNS CHAREST, LLP

4725 Wisconsin Avenue, NW,

Suite 200

Washington, D.C. 20016

Telephone: (202) 577-3977

ccormier@burnscharest.com

JAMES R. MARTIN

JENNIFER D. HACKETT

ZELLE LLP

1775 Pennsylvania Avenue,

Suite 375

Washington, D.C. 20006

Telephone: (202) 899-4100

jmartin@zelle.com

jhackett@zelle.com

JONATHAN R. MACBRIDE

ZELLE LLP

1635 Market Street,

Suite 1600

Philadelphia, PA 19103

Telephone: (484) 532-5341

jmacbride@zelle.com

Counsel for Petitioners Audubon Imports, LLC d/b/a Mercedes

Benz of Baton Rouge, Autohaus Acquisition, Inc., Estate Motors,

Inc., Powders Automobiles, Inc., f/k/a Powders Volkswagen Audi,

Inc., f/k/a Powders Volkswagen, Inc., Team Imports, LLC d/b/a

Team Audi and Team VW, Tom Schmidt, Wyoming Valley Motors,

Inc. d/b/a Wyoming Valley BMW, and Bronsberg & Hughes

Pontiac, Inc., d/b/a Porsche Wyoming Valley, individually

and behalf of all others similarly situated.

[Additional Counsel Listed On Inside Cover]

================================================================================================================

COCKLE LEGAL BRIEFS (800) 225-6964

WWW.COCKLELEGALBRIEFS.COM

JEFFREY M. SCAFARIA

SCAFARIA LAW

2000 Market Street, Suite 1440

Philadelphia, PA 19103

Telephone: (215) 800-1083

jeff@scafarialaw.com

ERIC L. CHASE

RONALD J. CAMPIONE

BRESSLER, AMERY & ROSS, P.C.

325 Columbia Turnpike,

Suite 301

Florham Park, NJ 07932

17 State Street, 34th Floor

New York, NY 10004

Telephone: (973) 514-1200

echase@bressler.com

rcampione@bressler.com

WILLIAM A. KERSHAW

IAN J. BARLOW

KERSHAW, COOK & TALLEY, P.C.

401 Watt Avenue, Suite 1

Sacramento, CA 95864

Telephone: (916) 520-6639

bill@kctlegal.com

ian@kctlegal.com

ISAAC L. DIEL

SHARP LAW LLP

4820 W 75th Street

Prairie Village, KS 66208

Telephone: (913) 901-0505

idiel@midwest-law.com

LARRY D. LAHMAN

MITCHELL DE CLERCK

202 West Broadway Avenue

Enid, OK 73701

Telephone: (580) 498-1787

larry.lahman@sbcglobal.net

CHRISTOPHER T. MICHELETTI

JUDITH A. ZAHID

QIANWEI FU

ZELLE LLP

555 12th Street, Suite 1230

Oakland, CA 94607

Telephone: (415) 633-1912

cmicheletti@zelle.com

jzahid@zelle.com

qfu@zelle.com

DENNIS M. GEORGE

ARANGIO GEORGE, LLP

2000 Market Street, Suite 1440

Philadelphia, PA 19103

Telephone: (215) 567-1999

dgeorge@arangiogeorge.com

DONALD C. KLAWITER

STERLINGTON, PLLC

228 Park Ave S

New York, NY 10003

Telephone: (202) 468-5222

dklawiter@sterlington.net

THOMAS P. THRASH

THRASH LAW FIRM, P.A.

1101 Garland Street

Little Rock, AR 72201

Telephone: (501) 374-1058

tomthrash@thrashlawfirmpa.com

CHARLES D. GABRIEL

CHALMERS & ADAMS, LLC

North Fulton Satellite Office

5805 State Bridge Road #G77

Johns Creek, GA 30097

Telephone: (678) 735-5903

cdgabriel@chalmersadams.com

STEPHEN B. MURRAY, SR.

STEPHEN B. MURRAY, JR.

MURRAY LAW FIRM

701 Poydras Street, Suite 4250

New Orleans, LA 70130

Telephone: (504) 525-8100

smurray@murray-lawfirm.com

smurrayjr@murray-lawfirm.com

QUESTION PRESENTED

To determine whether plaintiffs have met their

burden to plead a plausible claim under § 1 of the Sherman Act, may the district court weigh whether an inference of an unlawful conspiracy is more likely than

an inference of lawful conduct?

PARTIES TO THE PROCEEDINGS

Pursuant to Rule 14.1(b), the following list identifies all the parties appearing here and before the

United States Court of Appeals for the Ninth Circuit.

The Petitioners here and appellants below are

Audubon Imports, LLC d/b/a Mercedes Benz of Baton

Rouge, Autohaus Acquisition, Inc., Estate Motors, Inc.,

Powders Automobiles, Inc., f/k/a Powders Volkswagen

Audi, Inc., f/k/a Powders Volkswagen, Inc., Team Imports, LLC d/b/a Team Audi and Team VW, Tom

Schmidt, Wyoming Valley Motors, Inc. d/b/a Wyoming

Valley BMW, and Bronsberg & Hughes Pontiac, Inc.,

d/b/a Porsche Wyoming Valley, individually and behalf

of all others similarly situated.

The respondents here and appellees below are Bayerische Motoren Werke Aktiengesellschaft, (BMW AG),

BMW (US) Holding Corp., BMW of North America, LLC,

Volkswagen Group of America, Inc., Audi of America,

Inc., Audi Aktiengesellschaft (Audi AG), Audi of America,

LLC, Dr. Ing. h.c. F. Porsche AG, Porsche Cars of North

America, Inc. Daimler Aktiengesellschaft, (Daimler AG),

Daimler North America Corporation, Mercedes-Benz

U.S. International, Inc., Mercedez-Benz Vans, LLC, Mercedes-Benz USA, LLC, Volkswagen AG.

iii

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 29.6 Petitions State as follows:

Autohaus Acquisition, Inc., Estate Motors, Inc.,

Powders Automobiles, Inc., f/k/a Powders Volkswagen,

Inc., f/k/a Powders Volkswagen Audi, Inc., Wyoming

Valley Motors, Inc. d/b/a Wyoming Valley BMW, and

Bronsberg & Hughes Pontiac, Inc. d/b/a Porsche Wyoming Valley are privately owned corporations. They

have no parent corporations and no publicly held corporations own 10% or more of their stock.

RELATED CASES

•

In re: German Automotive Manufacturers Antitrust Litigation, No. 3:17-md-02796, U.S. District

Court for the Northern District of California.

Judgment entered on October 23, 2020.

•

Audubon Imports, LLC, dba Mercedes Benz of Baton Rouge, et al. v. Bayerische Motoren Werke Aktiengesellschaft, (BMW AG), et al., No. 20-17139,

U.S. Court of Appeals for the Ninth Circuit. Judgment entered on October 26, 2021.

•

Glen Reder, et al. v. Audi Aktiengesellschaft, (Audi

AG), et al., No. 20-17278, U.S. Court of Appeals for

the Ninth Circuit. Notice of dismissal filed August

30, 2021.

TABLE OF CONTENTS

Page

QUESTION PRESENTED...................................

PARTIES TO THE PROCEEDINGS ...................

CORPORATE DISCLOSURE STATEMENT ......

iii

RELATED CASES ...............................................

iii

TABLE OF CONTENTS ......................................

TABLE OF AUTHORITIES .................................

OPINIONS BELOW.............................................

STATEMENT OF JURISDICTION .....................

STATUTORY PROVISIONS INVOLVED ...........

STATEMENT .......................................................

Factual Background ..................................

A. Defendants agreed to avoid a technological arms race ..................................

B. Defendants agreed with steel manufacturers to fix steel prices .................. 10

II.

The Proceedings Below .............................. 11

A. The district court’s opinions ................ 12

B. The Panel’s opinion ............................. 15

REASON FOR GRANTING THE PETITION ..... 16

The First, Second, Fourth, and Sixth Circuits follow a lenient Twombly interpretation ............................................................. 17

II.

The Third and Eleventh Circuits follow

strict Twombly interpretation ................... 22

TABLE OF CONTENTS—Continued

Page

III.

The Court should grant certiorari to resolve the circuit split ................................. 24

CONCLUSION..................................................... 29

APPENDIX

Appendix A – Memorandum of United States

Court of Appeals for the Ninth Circuit, filed

October 26, 2021............................................... App. 1

Appendix B – Order re: Defendants’ Motions to

Dismissed of the United States District Court

of the Northern District of California, filed

June 17, 2019 ................................................... App. 7

Appendix C – Order re: Defendants’ Motions to

Dismissed of the United States District Court

of the Northern District of California, filed

March 31, 2020 ............................................... App. 37

Appendix D – Order Granting Motions to Dismiss of the United States District Court of the

Northern District of California, filed October

23, 2020 .......................................................... App. 70

Appendix E – Order of United States Court of

Appeals for the Ninth Circuit denying Petition for Rehearing and Petition for Rehearing

En Banc, filed January 25, 2022 .................... App. 99

TABLE OF AUTHORITIES

Page

CASES

Anderson News, L.L.C. v. Am. Media, Inc.,

732 F. Supp. 2d 389 (S.D.N.Y. 2010) .......................20

Anderson News, L.L.C. v. Am. Media, Inc.,

680 F.3d 162 (2d Cir. 2012) ............................... 19, 29

Bell Atlantic Corp. v. Twombly,

550 U.S. 544 (2007) ......................................... passim

Burtch v. Milberg Factors, Inc.,

662 F.3d 212 (3d Cir. 2011) .....................................23

Erie County, Ohio v. Morton Salt, Inc.,

702 F.3d 860 (6th Cir. 2012) .............................. 21, 22

Evergreen Partnering Grp., Inc. v. Pactiv Corp.,

720 F.3d 33 (1st Cir. 2013) ......................................17

Evergreen Partnering Grp., Inc. v. Pactiv Corp.,

865 F. Supp. 2d 133 (D. Mass. 2012) .......................19

Houck v. Substitute Tr. Servs., Inc.,

791 F.3d 473 (4th Cir. 2015) ....................................21

In re Disposable Contact Lens Antitrust,

215 F. Supp. 3d 1272 (M.D. Fla. 2016) .....................3

In re Insurance Brokerage Antitrust Litigation,

618 F.3d 300 (3d Cir. 2010) .....................................23

In re Musical Instruments,

798 F.3d 1186 (9th Cir. 2015) ..................................26

Jacobs v. Tempur-Pedic Int’l, Inc.,

626 F.3d 1327 (11th Cir. 2010) ................................24

vii

TABLE OF AUTHORITIES—Continued

Page

Matsushita Elec. Indus. Co. v.

Zenith Radio Corp.,

475 U.S. 574 (1986) ........................................... 18, 24

Monsanto Co. v. Spray-Rite Serv. Corp.,

465 U.S. 574 (1986) .................................................18

Name.Space, Inc. v. Internet Corp. for

Assigned Names and Nos.,

795 F.3d 1124 (9th Cir. 2015) ............................ 26, 27

Pfountz v. Navient Sols., LLC,

No. 4:17CV2753JCH, 2018 WL 534434

(E.D. Mo. Jan. 24, 2018) ............................................3

SD3, LLC v. Black & Decker (U.S.) Inc.,

801 F.3d 412 (Oct. 29, 2015) .............................. 20, 21

Starr v. Sony BMG Music Entm’t,

592 F.3d 314 (2d Cir. 2010) ............................... 20, 21

Theatre Enters., Inc. v. Paramount Film

Distrib. Corp.,

346 U.S. 537 (1954) .................................................18

Watson Carpet & Floor Covering, Inc. v.

Mohawk Indus., Inc.,

648 F.3d 452 (6th Cir. 2011) ....................................22

OTHER AUTHORITIES

Arthur R. Miller, Simplified Pleading, Meaningful Days in Court, and Trials on the Merits:

Reflections on the Deformation of Federal Procedure, 88 N.Y.U. L. Rev. 286 (2013) .........................4

viii

TABLE OF AUTHORITIES—Continued

Page

Commission Decision of 8.7.2021, No. AT.40178

(published Nov. 12, 2021), https://ec.europa.eu/

competition/antitrust/cases1/202146/AT_40178_

8022289_3048_5.pdf..................................................9

Lisa Jose Fales & Paul Feinstein, Make Up Your

Mind Already: Circuit Splits Regarding the

Role of Inferences at the Pleading Stage and

Summary Judgment, 34 Antitrust Magazine

(Fall 2019)..................................................................3

Natalma “Tami” McKnew, I Just Love A Good

Debate! Twombly and Iqbal Five Years Later,

33 Franchise L.J. 33 (2013) .......................................4

Vivek Ghosal & D. Daniel Sokol, The Rise and

(Potential) Fall of U.S. Cartel Enforcement,

2020 U. Ill. L. Rev. 471 (2020) ...................................3

William H. Page, Pleading, Discovery, and Proof

of Sherman Act Agreements: Harmonizing

Twombly and Matsushita, 82 Antitrust L.J.

123 (2018) ..................................................................3

RULES

Fed. R. Civ. P. 8(a) .......................................................26

STATUTES

15 U.S.C. § 1 .................................................. 1, 2, 11, 23

OPINIONS BELOW

The opinion of the court of appeals is reproduced

in the appendix to this petition (“Pet. App.”) at Pet.

App. 1 and is unreported. The orders of the district

court granting Defendants’ motions to dismiss are reproduced at Pet. App. 7, Pet. App. 37, and Pet. App. 70.

The decision at Pet. App. 7 is reported at 392 F. Supp.

3d 1059. The decision at Pet. App. 37 is unreported. The

decision at Pet. App. 70 is reported at 497 F. Supp. 3d

745.

---------------------------------♦---------------------------------

STATEMENT OF JURISDICTION

The Court of Appeals entered its judgment on October 26, 2021. Pet. App. 1. A timely petition for rehearing and petition for rehearing en banc was denied on

January 25, 2022. Pet. App. 99. This Court has jurisdiction under 28 U.S.C. § 1254(1).

---------------------------------♦---------------------------------

STATUTORY PROVISIONS INVOLVED

Section 1 of the Sherman Act, 15 U.S.C. § 1 provides, in relevant part:

Every contract, combination in the form of

trust or otherwise, or conspiracy, in restraint

of trade or commerce among the several

States, or with foreign nations, is declared to

be illegal.

---------------------------------♦---------------------------------

STATEMENT

Circuit courts are deeply divided on how to interpret the Supreme Court’s most-cited case. In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), the

Court held that a plaintiff ’s complaint must allege

“only enough facts to state a claim to relief that is plausible on its face.” To state a plausible claim under § 1

of the Sherman Act, the complaint must allege “enough

factual matter (taken as true) to suggest that an agreement was made.” Id. at 556. The Court noted that this

standard “does not impose a probability requirement

at the pleading stage; it simply calls for enough fact to

raise a reasonable expectation that discovery will reveal evidence of illegal agreement.” Id.

The Twombly Court also answered when parallel

conduct could support an inference of an agreement. To

support such an inference, parallel conduct “must be

placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that

could just as well be independent action.” Id. at 557.

Parallel conduct alone “gets the complaint close to stating a claim, but without some further factual enhancement it stops short of the line between possibility and

plausibility. . . .” Id.

Since Twombly, the courts of appeal have split on

where to draw the line between conduct that can possibly (not enough), probably (more than enough), and

plausibly (just right) support an inference of an agreement. The First, Second Fourth, and Sixth Circuits

have held that district courts should not weigh

competing inferences in assessing whether a complaint alleges a plausible anticompetitive conspiracy.

Courts in those circuits do not determine at the motion-to-dismiss stage whether a conspiracy or some

other, lawful conduct best explains the defendants’ actions. By contrast, the Third, Ninth, and Tenth Circuits

have held the district court may dismiss a complaint

because it believes lawful conduct more plausibly explains the defendants’ ambiguous conduct.

While reasonable minds may differ as to which interpretation is correct, two things are certain: First,

courts1 and commentators2 alike recognize that the

See, e.g., In re Disposable Contact Lens Antitrust, 215

F. Supp. 3d 1272, 1290 (M.D. Fla. 2016) (“The Circuit Courts of

Appeal are split on the question of whether competing inferences

may be balanced at the motion to dismiss stage.”); Pfountz v. Navient Sols., LLC, No. 4:17CV2753JCH, 2018 WL 534434, at *4

(E.D. Mo. Jan. 24, 2018) (rejecting out-of-circuit case law that allows district courts to weigh competing inferences in favor of the

in-circuit decisions that do not).

See, e.g., Vivek Ghosal & D. Daniel Sokol, The Rise and (Potential) Fall of U.S. Cartel Enforcement, 2020 U. Ill. L. Rev. 471,

497 (2020) (“There are both strict and more lenient readings of

Twombly across circuits with regard to how much additional evidence is necessary” to distinguish agreement and interdependence. (footnotes omitted)); Lisa Jose Fales & Paul Feinstein, Make

Up Your Mind Already: Circuit Splits Regarding the Role of Inferences at the Pleading Stage and Summary Judgment, 34 Antitrust Magazine (Fall 2019) (“One specific issue that has arisen

post-Twombly—and one on which several circuit courts disagree—is whether a court is permitted to weigh competing inferences in assessing the ‘plausibility’ of an alleged conspiracy under

Twombly.”); William H. Page, Pleading, Discovery, and Proof of

Sherman Act Agreements: Harmonizing Twombly and Matsushita, 82 Antitrust L.J. 123, 138 (2018) (“Courts apply Twombly

with a range of degrees of stringency, but, for clarity, I will group

circuit split exists. And second, the circuit split has resulted in irreconcilable case law that the Supreme

Court must address.

This case offers an opportunity to do so. Petitioners, Plaintiffs below, are a putative class of automotive

dealerships that purchase cars directly from Defendants for resale in the United States. And their Second

Amended Complaint contains detailed factual allegations plausibly asserting claims that Germany’s leading luxury automobile manufacturers—Volkswagen,

Audi, Porsche, Daimler (Mercedes), and BMW (collectively, “Defendants”)—conspired to (1) allocate the

market for German Luxury Cars by limiting any one

firm’s ability to innovate and gain competitive advantage, (2) join the steel manufacturers’ price-fixing

conspiracy so that Defendants can pass on surcharges

on to Plaintiffs, and (3) restrict the development of

electric vehicles to preserve Defendants’ investment in

diesel technologies.

The factual allegations are supported by two

findings by European competition authorities that

them into only two: stringent and lenient.”); Natalma “Tami”

McKnew, I Just Love A Good Debate! Twombly and Iqbal Five

Years Later, 33 Franchise L.J. 33, 47 (2013); Arthur R. Miller,

Simplified Pleading, Meaningful Days in Court, and Trials on the

Merits: Reflections on the Deformation of Federal Procedure, 88

N.Y.U. L. Rev. 286, 334 n.187 (2013) (noting that Twombly has

resulted in inconsistent outcomes in the courts of appeal); id. at

339-40 & nn.203-04 (comparing a district court opinion that applied a “more likely” standard with two cases that applied a “[f ]ar

more benign” standard that did not allow the district court to

choose between two plausible inferences).

Defendants engaged in anticompetitive conspiracies,

almost a billion Euros in fines for those violations, Defendants’ admissions to the conduct, and groundbreaking work of German investigative reporters, who have

seen the original documents and Volkswagen’s leniency proffer to competition authorities. Taken together,

Plaintiffs’ allegations more plausibly allege conspiracies that injured American automobile dealerships.

And yet, time and time again, the courts below expanded its inquiry from plausible to whether Plaintiffs’

allegations were “more” or “less” plausible than factual

circumstances posited by the Court. This recasting of

the plausibility standard renders it capricious and

turns the complaint into a Rorschach test for a judges’

favored narrative. Enough is enough.

Factual Background

Defendants secretly banded together to form a cartel that they called the “Circle of Five.” 3-ER-311.3 The

Circle of Five suppressed competition among themselves while maintaining a façade of competition. Id.

Their managers and engineers met hundreds of times

in “working groups” covering diesel engines, gasoline

engines, clutches, air suspension, seat systems, brake

controls, and mechanical attachments. 3-ER-311-12.

The working groups’ guiding principle was to avoid

an “arms race”—which meant that the Circle of Five

Citations to “3-ER-___” refer to the page number of the Second Amended Complaint in Volume 3 of the record on appeal in

No. 20-17139.

would not compete against each other to gain market

share through technological innovation. 3-ER-312.

A. Defendants agreed to avoid a technological arms race.

As an example, Defendants agreed to develop and

falsely promote their outdated diesel technology as

“clean” and compliant with emissions regulations rather than compete to develop greener luxury cars (electric vehicles). 3-ER-312-29. Defendants developed a

method to neutralize the nitrogen oxide produced by

their diesel cars by injecting a fluid known as “AdBlue”

into the engine. 3-ER-313-14, 322. But Defendants’ solution presented commercially insurmountable problems—either install unwieldy and expensive tanks to

hold AdBlue, or drivers would have to constantly refill

their AdBlue tanks to keep emissions within legal limits. 3-ER-313-14, 322-23.

To hide those problems, Defendants held clandestine meetings in which they agreed not to engage in a

tank-size “arms race.” 3-ER-314-19. They agreed in

those meetings to cap AdBlue dosing ratios and deceive

consumers and authorities about the emissions from

their supposed “clean” diesel luxury cars emitted in

normal driving conditions. 3-ER-314-319, 321-22, 32526. Although Defendants have not disclosed the documents that they provided to government regulators,

the ones reported in the news paint a detailed picture

of Defendants’ collusion.

In one example, an internal Volkswagen memo of

a secret meeting among Defendants states the Circle

of Five wanted a limit on the amount of AdBlue dosing,

meaning the amount of AdBlue used to clean diesel

emissions. 3-ER-315. But, they each agreed to keep secret the “true motivation for this limitation”—avoiding

an arms race—from environmental regulators in the

United States. Id. (quotation marks omitted).

In another example, Audi in April 2007 circulated

a memo among Defendants titled “Diesel USA-SCR

System.” 3-ER-316-17. The memo, written on BMW letterhead, stated it was “jointly developed by BMW,

[Mercedes], and [Audi] to validate the cap for AdBlue

dosing quantity.” Id. (quotation marks omitted). The

proposal distinguished between two “operation modes”

in exhaust emissions: a default mode that failed emissions standards under real-world driving conditions

and another mode active only during testing conditions

that allowed their cars to pass emissions tests. 3-ER310, 315-22, 325. The memo has a warning that “under

no circumstances [should] it be shown to the authorities in this degree of detail!” 3-ER-317 (quotation

marks omitted). Defendants also agreed upon pretextual reasons for the “online dosing mode” if spotted

by U.S. authorities. Id.

An October 2007 internal document notes the “urgent need for cooperation” to implement their agreements. 3-ER-317-18 (quotation marks omitted). A

December 2007 internal memo regarding the AdBlue

dosing modes states “mission accomplished.” 3-ER317-18 (quotation marks omitted).

An internal Audi memo from January 2008 candidly states under the heading “AdBlue consumption,”

“My assessment: We won’t make it entirely without

cheating.” 3-ER-318 (emphasis added) (quotation

marks omitted). The memo reflected the consensus

view of the Circle of Five’s “OEM taskforce,” a group of

executives from each Defendant. Id. In one 2008 document, an Audi manager confirmed to Volkswagen’s

management that “this topic will not be mentioned in

any form to the US authorities.” Id. (quotation marks

omitted).

Another document from 2008 states that executives at VW, Audi, Mercedes, BMW, and a supplier

(Bosch) discussed the fact that AdBlue technology did

not meet clean emissions standards but the attendees

agreed “not to mention this issue in any form to the

U.S. authorities EPA [Environmental Protection Agency]

and CARB [California Air Resources Board] so as to

not jeopardize the launch in the U.S.” 3-ER-318-19

(quotation marks omitted). And when U.S. regulators

demanded AdBlue tanks that would ensure a driving

distance of 10,000 miles, Defendants agreed that tanks

that big would be unmarketable and required a “coordinated scenario” for the future. 3-ER-321.

While this case was on appeal, the European Commission fined Defendants €875 million for conspiring

to restrict technology. See Dkt. 39, 42.4 The Commission released its decision after the Ninth Circuit had

Citations to “Dkt. ___” refer to the docket numbers on appeal in No. 20-17139.

ruled on Plaintiffs’ appeal. It found—and Defendants

have now admitted in “clear and unequivocal terms”—

that Defendants entered into a naked restraint on innovation:

The agreements and/or concerted practices

concluded by DAIMLER, VW and BMW in respect of their SCR-systems included the coordination of AdBlue tank sizes and refill

ranges, as well as the exchange of assumed

average AdBlue-consumption for their new

diesel passenger car models with SCR-system

in the relevant period. For this purpose, they

had regular contact and exchanged competitively sensitive information on current and future strategies.

Commission Decision of 8.7.2021, No. AT.40178 (published Nov. 12, 2021), https://ec.europa.eu/competition/

antitrust/cases1/202146/AT_40178_8022289_3048_5.pdf.

The decision also found that Defendants’ “agreed on

AdBlue refill ranges of approximately 10,000 km to

ensure that there would be no competing offers with

significantly longer refill ranges.” Id. ¶ 127. And it repeatedly emphasizes that Defendants’ agreement “by

its very nature” restricted innovation, limited consumer choice, and was not ancillary to achieving any

alleged competitive benefits. Id. ¶¶ 7, 125, 139, 140,

244 (agreement “by its very nature” anticompetitive);

id. ¶¶ 7, 90, 125, 139, 160 (agreement limited consumer

choice); id. ¶¶ 127, 133, 136, 175 (agreement not ancillary to competitive benefits).

B. Defendants agreed with steel manufacturers to fix steel prices.

Defendants also conspired with steel manufacturers to raise prices for the steel that was used to make

essential components in the Class Vehicles. 3-ER-33037. This price-fixing conspiracy inflated the prices that

Plaintiffs paid for the Class Vehicles. 3-ER-337.

For decades, a 1951 European treaty allowed steel

manufacturers to coordinate with respect to steel surcharges and pass those surcharges to customers like

Defendants in this case. 3-ER-330. The treaty expired

in 2002. 3-ER-331. Without the treaty’s safe harbor, the

steel manufacturers had to compete against each other

for sales, and their profits declined significantly. Id.

Customers, like Defendants, used the competitive process to negotiate lower steel prices. 3-ER-332.

Faced with falling profits, the steel manufacturers

renewed their (now unlawful) price-fixing agreements.

3-ER-332-33. Steel manufacturers agreed that they

would implement surcharges in late-2003 to pass on

every cost increase to their customers. Id.

And Defendants in 2004 agreed to accept those

higher prices. 3-ER-333-34. Defendants recognized

that they could accept higher prices so long as they all

agreed to accept the same prices. 3-ER-344. They met

with the steel producers twice a year at trade association meetings “to implement and enforce” the agreement. 3-ER-537-38. At these meetings, Defendants

also “assured and encouraged each other to continue to

adhere” to the agreement. 3-ER-538.

The German competition authority, the Bundeskartellamt, found these agreements illegal. 3-ER-333. It fined

the steel manufacturers €205 million for conspiring to

fix long-steel prices—the type of steel that is used in

the Plaintiffs’ vehicles. Id. The Bundeskartellamt also

fined Defendants €100 million for joining that conspiracy, noting that Defendants’ agreement “eliminated”

competition because “key components of the purchase

price . . . were no longer negotiated individually.” 3-ER333, 538. Defendants cooperated with the investigation

and admitted to participating in the conspiracy. Id.

II.

The Proceedings Below

Plaintiffs allege that Defendants violated § 1 of

the Sherman Act in three ways. First, plaintiffs allege

that Defendants agreed to restrict output by restricting the development of diesel emissions systems. 3-ER309-330, 357-58, 368-70. Second, Plaintiffs allege that

Defendants agreed to fix prices when they agreed to

join the steel manufacturers’ price-fixing conspiracy. 3ER-330-37, 370-71.

And third, Plaintiffs allege that these first two

conspiracies reveal a broader agreement to allocate

the market by foreclosing competitive avenues. 3-ER366-68. By agreeing that they would not compete on

the quality, development, or introduction of new technology, Defendants prevented each other from differentiating their vehicles enough to upset their

market share. Id. Similarly, Defendants coordinated

the release of new models of the class vehicles and

model refreshes so that no manufacturer would release

a “new” or “refreshed” model in a way that would affect

the status quo. Id. Likewise, Defendants eliminated

competition for the lowest steel prices by joining the

steel manufacturers’ price-fixing cartel. 3-ER-330-37,

370-71. So long as they each paid the same amount,

Defendants agreed to pay illegal surcharges that the

steel manufacturers tacked on. Id. By agreeing to pay

the same price for steel, rather than negotiate for

lower prices, Defendants removed another mechanism

through which they could have differentiated themselves on price. Id.

A. The district court’s opinions

Both direct purchasers and indirect purchasers

brought suits against the Defendants for the injuries

they suffered because of Defendants’ anticompetitive

conduct. On October 5, 2017, the United States Judicial Panel on Multidistrict Litigation centralized the

litigation in the Northern District of California. On

March 15, 2018, Plaintiffs filed a Consolidated Complaint. Defendants moved to dismiss, and on June 17,

2019, the district court dismissed the complaint with

leave to amend. Pet. App. 7.

Plaintiffs then filed their First Amended Complaint on August 15, 2019. 5-ER-866-958. Defendants

again moved to dismiss, and on March 31, 2020, the

district court granted their motion. Pet. App. 37. In so

doing, the district court rejected Plaintiffs’ allegation

that Defendants entered into a market-allocation

agreement. Id. at 59, 63-64. While likewise rejecting

Plaintiffs’ steel conspiracy allegations, the district

court nevertheless granted Plaintiffs leave to amend

the steel conspiracy to address the court’s concerns. Id.

at 65-68.

1. The district court found that Plaintiffs pled an

agreement to restrict AdBlue tank sizes, dosing rates,

and particulate filters. Id. at 25, 46-48, 57. It noted that

Plaintiffs’ complaint “contain[ed] detailed factual allegations describing Defendants’ ‘coordination’ of AdBlue dosage rate and tank size, including the content

of Defendants’ agreements (including direct quotes

from allegedly criminal negotiations), the positions of

the conspirators within Defendants’ corporate hierarchies, and where and when the agreements were

made.” Id. at 45 (citations and quotation marks omitted). For those agreements at least, Plaintiffs had alleged “who, did what, to whom (or with whom), where,

and when. . . .” Id. at 57-58 (quotation marks omitted).

Nonetheless, the court held that the agreements

did not support a naked restraint on innovation because “agreements on AdBlue tank size and dosing

rate alone do not plausibly support the existence of a

broader conspiracy covering Defendants’ entire diesel

emissions control system.” Id. at 48. The court further

held that the agreements were not unreasonable restraints of trade because they “may have had procompetitive effects” and the Defendants “may have agreed

to a standard that they believed would ultimately benefit all consumers.” Id. at 51.

2. The district court dismissed the steel conspiracy because Plaintiffs had not pled a plausible antitrust injury. Despite finding that Plaintiffs had

“plausibly alleged that steel manufacturers agreed

with one another to fix steel prices” and that “Defendants agreed to accept standard surcharges rather than

individually negotiate with steel manufacturers,” the

court accepted Defendants’ contention that their steel

conspiracy probably lowered prices. Id. at 94-95. The

court held that “an agreement among competitors to

negotiate collectively with suppliers is not price-fixing,

even if those suppliers (here, the steel manufacturers)

are engaged in price-fixing. . . . [S]uch an approach

could plausibly have led to lower steel prices. . . .” Id.

at 96 (emphasis added); see also id. at 96 n.6 (“[A] lack

of individual negotiation among Defendants with steel

manufacturers could have led to (but did not necessarily lead to) increased steel prices.”); id. at 68 (finding that Defendants’ conduct “even if unlawful, most

plausibly led to lower prices” (emphasis added)).

The court further held that Plaintiffs had not alleged that Defendants agreed to pass increased steel

prices. Id. at 97-98. The court reasoned that “there are

many economically rational reasons why Defendants

may have agreed to accept the steel surcharges, including ensuring a stable supply of steel and avoiding frequent renegotiating with the steel manufacturers.” Id.

at 97.

3. Finally, the court held that the agreements did

not plausibly support a market-allocation agreement.

The court reasoned it was “implausible to infer that

standardizing a few niche technical features would

enable Defendants to keep their respective market

shares stable. . . .” Id. at 58. The court also believed “it

[was] unlikely that adopting similar formulas for the

price of a single raw material (albeit an important one)

would be enough to keep shares of the American market in an agreeable equilibrium.” Id. at 58-59.

B. The Panel’s opinion

The Panel’s six-page opinion largely accepted the

district court’s decision without analysis. First, the

Panel held that the district court properly dismissed

the market-allocation conspiracy. Pet. App. 2-3. The

Panel found that the agreement was “devoid of factual

development,” too narrow to establish a “conspiracy to

restrict innovation on all, or most, aspects of vehicle

development,” or “could just as easily suggest rational,

legal business behavior by the defendants as . . . an illegal conspiracy.” Id. at 2-3 (quotation marks omitted).

Second, the Panel held that the district court

properly dismissed Plaintiffs’ claim that they paid inflated vehicle prices due to Defendants’ steel price-fixing conspiracy. Id. at 3. The Panel found that Plaintiffs

“did not plausibly allege a credible antitrust injury” because Plaintiffs “have not alleged any facts suggesting

that the price of Defendants’ vehicles increased while

the alleged steel conspiracy was in effect or decreased

after it ended.” Id. at 3.

Third, the Panel held that the district court

properly dismissed Plaintiffs’ claim that Defendants

conspired to adopt the same clean diesel technology

and forego developing electric vehicles. Id. at 4. The

Panel found that Plaintiffs contradicted their claim because they “acknowledge[d] that three Defendants

launched plug-in/hybrid vehicles while the alleged conspiracy was in effect.” Id. at 4 (quotation marks omitted). The Panel also found a “benign explanation for

Defendants’ conduct: Defendants had already invested

heavily in diesel engines when the demand for lowemission vehicles began to rise.” Id. at 4 (quotation

marks omitted).

---------------------------------♦---------------------------------

REASON FOR GRANTING THE PETITION

Section 1 of the Sherman Act “does not prohibit all

unreasonable restraints of trade . . . but only restraints

effected by a contract, combination, or conspiracy.”

Twombly, 550 U.S. at 553 (brackets and citation omitted). Plaintiffs asserting a § 1 claim must therefore

plead “enough factual matter (taken as true) to suggest

that an agreement was made.” Id. at 556.

In Twombly, this Court determined the amount of

factual allegations necessary to survive a motion to

dismiss when a plaintiff ’s § 1 complaint rests entirely

on parallel conduct. Id. at 564. The Court emphasized

that “[w]ithout more, parallel conduct does not suggest

conspiracy.” Id. at 556-557. Instead, the “allegations of

parallel conduct . . . must be placed in a context that

raises a suggestion of a preceding agreement, not

merely parallel conduct that could just as well be independent action.” Id. at 557.

The Twombly Court stressed that the plausibility

standard “does not impose a probability requirement

at the pleading stage.” Id. at 556. It just “calls for

enough fact to raise a reasonable expectation that

discovery will reveal evidence of illegal agreement.” Id.

Indeed, “a well-pleaded complaint may proceed even

if it strikes a savvy judge that actual proof of those

facts is improbable, and that a recovery is very remote

and unlikely.” Id. (quotation marks and citation omitted).

Despite the Court’s best efforts at clarifying the

pleading standard for antitrust conspiracies, the

courts of appeal are deeply divided on whether they

can weigh competing inferences at the motion-todismiss stage.

The First, Second, Fourth, and Sixth Circuits follow a lenient Twombly interpretation.

The First, Second, Fourth, and Sixth Circuits interpret Twombly leniently and forbid district courts

from weighing competing inferences to determine

plausibility.

First Circuit. In Evergreen Partnering Grp., Inc.

v. Pactiv Corp., 720 F.3d 33, 43 (1st Cir. 2013), the First

Circuit recognized that the line drawn in Twombly

between merely parallel conduct and a plausible agreement has “elicited considerable confusion among the

lower courts. . . .” In the First Circuit’s view, citations

to summary-judgment and post-trial cases have led to

a “slow influx of unreasonably high pleading requirements at the earliest stages of antitrust litigation[.]”

Id. at 44 (quotation marks omitted). But pleading requirements should be “starkly distinguished from

what would be required at later litigation stages[.]” Id.

at 46 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986); Monsanto Co. v. SprayRite Serv. Corp., 465 U.S. 752, 768 (1984); Theatre Enters., Inc. v. Paramount Film Distrib. Corp., 346 U.S.

537, 540-41 (1954)). While courts assessing plausibility

during summary judgment have access to a developed

record, courts assessing a complaint “ha[ve] no substantiated basis in the record to credit a defendant’s

counterallegations.” Id. at 45. And so, the court found

it “imperative [to] correct this confusion and clarify the

proper pleading requirements for sufficiently alleging

agreement in § 1 complaints.” Id. at 44.

The First Circuit found “that allegations contextualizing agreement need not make any unlawful agreement more likely than independent action nor need

they rule out the possibility of independent action at

the motion to dismiss stage.” Id. at 47. Courts should

not “decide, at the pleading stage, which inferences are

more plausible than other competing inferences, since

those questions are properly left to the factfinder.” Id.

at 45. Rather, plaintiffs must allege an agreement’s

“general contours” and support those allegations

“with a context that tends to make said agreement

plausible.” Id. at 46.

The First Circuit found that the lower court had

improperly applied a heightened pleading standard in

reviewing the plaintiff ’s complaint. Id. at 50. The

plaintiff, Evergreen, alleged that polystyrene manufacturers and a trade association conspired to organize a

group boycott of Evergreen’s recycling service. Id. at

40. The district court in that case dismissed the plaintiff ’s Section 1 claim because “legitimate business reasons . . . can as easily explain defendants’ refusal to

deal with Evergreen or to compete with one another for

market share as can any insinuation of a conspiratorial agreement[.]” Id. at 42 (quoting Evergreen Partnering Grp., Inc. v. Pactiv Corp., 865 F. Supp. 2d 133, 140

(D. Mass. 2012), vacated and remanded, 720 F.3d 33)

(emphasis in original).

The First Circuit reversed the district court. Id. at

50-51. The court reasoned that the district court had

“improperly occupied a factfinder role when it both

chose among plausible alternative theories interpreting defendants’ conduct and adopted as true allegations made by defendants in weighing the plausibility

of theories put forward by the parties.” Id. at 50.

Second Circuit. In Anderson News, L.L.C. v. Am.

Media, Inc., 680 F.3d 162, 189 (2d Cir. 2012), the Second Circuit reversed a district court that applied the

wrong plausibility standard. The district court had dismissed the plaintiff ’s complaint because “the possibility that each of the defendants had acted ‘separately’

in deciding to stop supplying magazines to Anderson

was ‘[t]he most plausible scenario[.]’ ” Id. at 190 (quoting Anderson News, L.L.C. v. Am. Media, Inc., 732

F. Supp. 2d 389, 407 (S.D.N.Y. 2010), vacated and remanded, 680 F.3d 162). But “an innocuous interpretation of the defendants’ conduct may be plausible . . .

does not mean that the plaintiff ’s allegation that that

conduct was culpable is not also plausible.” Id. The

court noted that it cannot “dismiss the complaint on

the basis of the court’s choice among plausible alternatives.” Id. That choice should “be a task for the factfinder.” Id. Once the plaintiff alleged a plausible

conspiracy, the plaintiff had met its burden at the

pleading stage. See id. The court reversed the district

court’s dismissal and allowed the plaintiff ’s case to

proceed. Id.

Fourth Circuit. The Fourth Circuit also cautioned against “import[ing] the summary-judgment

standard into the motion-to-dismiss stage.” SD3, LLC

v. Black & Decker (U.S.) Inc., 801 F.3d 412, 425 (4th Cir.

2015), as amended on reh’g in part (Oct. 29, 2015)

(quoting Twombly, 550 U.S. at 554). At summary judgment, plaintiffs must produce evidence that “ ‘tends to

exclude the possibility of independent action.’ ” Id.

(quoting Twombly, 550 U.S. at 554; Starr v. Sony BMG

Music Entm’t, 592 F.3d 314, 325 (2d Cir. 2010)). The

pleading stage, however, concerns an “antecedent question”: Does the complaint “ ‘plausibly suggest[ ]’ ” an anticompetitive conspiracy? Id. at 425 (quoting Twombly,

550 U.S. at 557). That threshold “remains considerably

less than the tends to rule out the possibility standard

for summary judgment. . . .” Id. (quoting Starr, 592

F.3d at 325) (quotation marks omitted).

To plausibly suggest an anticompetitive conspiracy at the pleading stage, plaintiffs must plead something “more” than just parallel conduct. Id. at 424

(quoting Twombly, 550 U.S. at 557). Courts assessing

whether the plaintiff has met that burden need not

search for “factual suppositions that might ‘perhaps’

explain the relevant parallel conduct.” Id. at 430. Instead, plaintiffs must allege “further circumstance[s]”

that point towards a meeting of the minds. Id. at 424

(quoting Twombly, 550 U.S. at 557). The court found

that “weighing the competing inferences that can be

drawn from the complaint” conflates plausibility with

probability. Id. at 425. Accordingly, the court instructed

against “determine[ing] ‘whether a lawful alternative

explanation appear[s] more likely’ from the facts of the

complaint” at the pleading stage. Id. at 425 (quoting

Houck v. Substitute Tr. Servs., Inc., 791 F.3d 473, 484

(4th Cir. 2015)).

Sixth Circuit. In Erie County, Ohio v. Morton

Salt, Inc., 702 F.3d 860, 869 (6th Cir. 2012), the Sixth

Circuit held, “to state a Section One claim, a plaintiff

need not allege a fact pattern that ‘tends to exclude the

possibility’ of lawful, independent conduct.” That

standard “traces its provenance to . . . decisions

dealing with summary judgment and the standard of

proof required to submit an issue to the jury.” Id.

The Sixth Circuit declined to extend that standard

to the motion-to-dismiss stage. Id. To hold otherwise,

the court reasoned, would be unfair to plaintiffs:

If a plaintiff were required to allege facts excluding the possibility of lawful conduct, almost no private plaintiff ’s complaint could

state a Section One claim. Rational people, after all, do not conspire in the open, and a

plaintiff is very unlikely to have factual information that would exclude the possibility of

non-conspiratorial explanations before discovery.

Id. at 869 (emphasis in original). Accordingly, the court

held that “the plaintiff is not required to allege facts

showing that an unlawful agreement is more likely

than lawful parallel conduct.” Id. at 868; see also Watson Carpet & Floor Covering, Inc. v. Mohawk Indus.,

Inc., 648 F.3d 452, 458 (6th Cir. 2011) (“Ferreting out

the most likely reason for the defendants’ actions is not

appropriate at the pleadings stage. [T]he plausibility

of [the defendants’] reason for the refusals to sell carpet does not render all other reasons implausible.”).

II.

The Third and Eleventh Circuits follow

strict Twombly interpretation.

The opinions below accord with the strict Twombly

interpretation held by the Third and Eleventh Circuits, which allows district courts to weigh competing

inferences when assessing whether the plaintiff has

pled a plausible § 1 claim.

Third Circuit. In Insurance Brokerage Antitrust Litigation, 618 F.3d 300, 322 (3d Cir. 2010) (internal citation omitted), the Third Circuit noted that

Twombly did not expressly address “the relationship

between th[e] summary judgment (and directed judgment) jurisprudence governing the kind of evidentiary

facts necessary to support a finding of conspiracy, on

the one hand, and the ‘antecedent’ issue of a § 1 plaintiffs pleading burden, on the other.” The court, nonetheless, concluded that “Twombly aligns the pleading

standard with the summary judgment standard . . . :

Plaintiffs relying on circumstantial evidence of an

agreement must make a showing at both stages . . . of

‘something more than merely parallel behavior,’ something ‘plausibly suggest[ive of (not merely consistent

with) agreement.’ ” Id. at 322 (quoting Twombly, 550

U.S. at 560) (brackets in original).

While Twombly “does not require . . . that the

plaintiff plead facts supporting an inference of defendant’s liability more compelling than the opposing inference,” it does “make clear that . . . it is unreasonable to

infer an agreement from allegations of parallel conduct

that are equally consistent with independently motivated behavior.” Id. at 341 n.42 (citing Twombly, 550

U.S. at 557, 60). In other words, the alleged conduct

must be more consistent with a conspiratorial agreement than interdependence. Cf. Burtch v. Milberg Factors, Inc., 662 F.3d 212, 228 (3d Cir. 2011) (affirming the

district court’s dismissal of a complaint that alleged

“no factual detail in the Complaint that makes it any

more likely that the Defendants’ parallel conduct was

the result of an unlawful agreement than, instead, the

result of independent rational, and wholly lawful decisions by each Defendant. . . .”).

Eleventh Circuit. In Jacobs v. Tempur-Pedic International, Inc., 626 F.3d 1327, 1343 (11th Cir. 2010),

the Eleventh Circuit held that Twombly requires that

district courts compare competing inferences drawn

from the complaint. The plaintiffs in that case alleged

that a mattress manufacturer and its distributors conspired to set minimum prices. Id. at 1331-32. The Eleventh Circuit held that district courts must “juxtapose[ ]

the inference of independent economic self-interest”

against “the inference of conspiracy.” Id. at 1343 (citing

Matsushita, 475 U.S. at 596-97). As a result, the court

held the plaintiff “had the burden to present allegations showing why it is more plausible that [the manufacturer] and its distributors . . . would enter into an

illegal pricefixing agreement . . . to reach the same result realized by purely rational profit-maximizing behavior.” Id. at 1342 (emphasis added). The Eleventh

Circuit held that the plaintiffs pled no facts suggesting

that conspiracy was a “more plausible” inference than

lawful conduct and dismissed the complaint. Id. at

1342-43.

III. The Court should grant certiorari to resolve the circuit split.

This case sits at the heart of the circuit split. For

each agreement that Plaintiffs alleged, the courts below weighed whether inferences derived from

hypothetical, innocent conduct could explain Defendants’ conduct “more plausibly than” or “just as easily

as” an illegal agreement.

For example, Plaintiffs alleged that Defendants

coordinated product refreshes. The Complaint notes

how BMW, Porsche, Mercedes, and Audi released updated versions of their SUVs in 2009 and their “midsize luxury” sedans in 2009-10 and 2017-18. 3-ER-35153. By releasing their model updates at the same time,

Defendants avoided a shift in market share that would

occur if one manufacturer had differentiated itself by

releasing an updated model on an uncoordinated schedule. Id. The “alignment cannot be explained away by a

simple ‘tit-for-tat’ strategy in which each competitor

reacts and updates products in short order to follow

the technological leader, as program development and

planning is a multi-year, burdensome process undertaken by OEMs.” Id.

The district court found that Plaintiffs’ allegations

of parallel conduct did not support plaintiffs’ no-armsrace agreement because it “could just as easily (or even

more plausibly) reflect legitimate conscious parallelism as opposed to collusion, [so] it does not support

their ‘no arms race’ theory.” Pet. App. 60-61. The district court reasoned, “the fact that they all released

new products at similar times tends to suggest that

they were competing with each other, rather than the

opposite.” Id. at 59. Likewise, the Panel found that the

allegations “could just as easily suggest rational, legal

business behavior by the defendants as they could suggest an illegal conspiracy.” Id. at 61.

The courts below also dismissed Defendants’ failure to develop electric vehicles because it could be explained by “a benign explanation” for Defendants’

refusal to develop electric vehicles: “Defendants had already invested heavily in diesel engines. . . .” Id. at 45

(citing Name.Space, Inc. v. Internet Corp. for Assigned

Names and Nos., 795 F.3d 1124, 1130 (9th Cir. 2015)

(quotation marks omitted). That suggests it is just as,

if not more plausible that Defendants “arrive[d] at

identical decisions independently, [because] they

[were] cognizant of—and reacting to—similar market

pressures.” Id. at 64 (brackets in original) (quoting

In re Musical Instruments, 798 F.3d 1186, 1193 (9th

Cir. 2015)) (quotation marks omitted).

But this standard focuses on the wrong issue. The

issue at the pleading stage is not whether interdependence or benign can explain Defendants’ conduct

equally or better than an illegal agreement. The Supreme Court rejected that approach in Twombly when

it found that Rule 8(a) “does not impose a probability

requirement at the pleading stage[.]” Twombly, 550 U.S.

at 556 (emphasis added).

Rather, the issue is whether Plaintiffs have alleged sufficient context to “raise[ ] a suggestion” that

the parallel conduct was the product of a conspiracy.

Id. at 577. As the First, Second, Fourth, and Sixth Circuits have recognized, Twombly contemplates that

there will be cases in which factual allegations beyond

simple parallel conduct give rise to multiple plausible

explanations, some consistent with illegal conduct,

others with innocent activity. The Court instructed

that trial courts are not, however, to decide which plausible interpretation of the facts is the most plausible.

Id. at 556 (“[A] well-pleaded complaint may proceed

even if it strikes a savvy judge that actual proof of

those facts is improbable, and that a recovery is very

remote and unlikely.”).

Here, that context suggests that the parallel conduct was the product of a preceding agreement. The allegations that Defendants’ parallel product refreshes

arose out of an agreement to avoid an innovation arms

race must be considered with, for example, Audi’s May

2014 email warning that the other Defendants should

not increase AdBlue tank size or dosing rates on its

own because that would “expand into an arms race

with regard to tank sizes, which we should continue to

avoid at all costs.” 3-ER-310 n.19, 318 n.48. So, too,

must those allegations be considered in light of Defendants’ October 2007 meeting where they discussed

“an urgent need for cooperation,” identified the need to

agree on “uniform escalation logic” for increasing AdBlue tank size, and assigned their respective “drive

managers” and “chassis managers” to carry out that

agreement. 3-ER-317-18 & n.48 (quotation marks

omitted).

The same is true “benign explanation” for Defendants’ refusal to develop electric vehicles: “Defendants

had already invested heavily in diesel engines. . . .”

Pet. App. at 4-5 (citing Name.Space, Inc., 795 F.3d at

1130) (quotation marks omitted). Context suggests

that their “heavy investment” was itself the product

of a conspiracy. Defendants agreed to lie to pass

emissions tests, rather than develop an electric car. 3ER-315-26. Indeed, the complaint describes a January

2008 memo candidly stating Defendants’ consensus

view about their vehicles’ ability to meet environmental regulations: “We won’t make it entirely without

cheating.” 3-ER-318 (quotation marks omitted). Another document describing a 2008 meeting of Defendants’ executives admits that AdBlue technology could

not meet emissions standards, so they agreed “not to

mention this issue in any form to the U.S. authorities

EPA and CARB so as to not jeopardize the launch in

the U.S.” 3-ER-318-19 (quotation marks omitted).

What’s more, through 2017, none of the Defendants

publicly sought to sell all-electric vehicles. 3-ER-32425. After the conspiracy ended, they suddenly changed

strategies, abandoned diesel development, and invested heavily in all-electric vehicle development. 3ER-326. Defendants also shut down their alliance to

promote “clean” diesel and the EUGT research group

that they exclusively controlled. 3-ER-327.

While the opinions below follow the circuits that

permit weighing competing inferences at the pleading

stage in some respects, they—and particularly the district court’s opinion—take that standard further than

any court has before. The district court found that

Plaintiffs had pled multiple agreements and still resolve inferences in Defendants’ favor. Specifically, the

court found that Plaintiffs had pled (1) an agreement

among steel manufacturers to fix steel prices, (2) an

agreement among Defendants to accept the steel manufacturers’ unilaterally set steel prices rather than

negotiate collectively, and (3) an agreement to develop

diesel cars using AdBlue tanks, an agreement to cap

AdBlue tank sizes and dosing rates, and an agreement

on particulate filters. The court’s analysis should have

stopped there. Even though the Defendants may have

alleged plausible benefits for those agreements, the

district court cannot “dismiss the complaint on the

basis of [its] choice among plausible alternatives.”

Anderson News, 680 F.3d at 190.

---------------------------------♦---------------------------------

CONCLUSION

The petition for a writ of certiorari should be

granted and the judgment of the court of appeal reversed.

Respectfully submitted,

WARREN T. BURNS

KYLE K. OXFORD

BURNS CHAREST, LLP

900 Jackson Street, Suite 500

Dallas, TX 75202

Telephone: (469) 904-4550

wburns@burnscharest.com

koxford@burnscharest.com

CHRISTOPHER J. CORMIER

BURNS CHAREST, LLP

4725 Wisconsin Avenue, NW, Suite 200

Washington, D.C. 20016

Telephone: (202) 577-3977

ccormier@burnscharest.com

JAMES R. MARTIN

JENNIFER D. HACKETT

ZELLE LLP

1775 Pennsylvania Avenue, Suite 375

Washington, D.C. 20006

Telephone: (202) 899-4100

jmartin@zelle.com

jhackett@zelle.com

JONATHAN R. MACBRIDE

ZELLE LLP

1635 Market Street, Suite 1600

Philadelphia, PA 19103

Telephone: (484) 532-5341

jmacbride@zelle.com

JEFFREY M. SCAFARIA

SCAFARIA LAW

2000 Market Street, Suite 1440

Philadelphia, PA 19103

Telephone: (215) 800-1083

jeff@scafarialaw.com

ERIC L. CHASE

RONALD J. CAMPIONE

BRESSLER, AMERY & ROSS, P.C.

325 Columbia Turnpike, Suite 301

Florham Park, NJ 07932

17 State Street, 34th Floor

New York, NY 10004

Telephone: (973) 514-1200

echase@bressler.com

rcampione@bressler.com

WILLIAM A. KERSHAW

IAN J. BARLOW

KERSHAW, COOK & TALLEY, P.C.

401 Watt Avenue, Suite 1

Sacramento, CA 95864

Telephone: (916) 520-6639

bill@kctlegal.com

ian@kctlegal.com

ISAAC L. DIEL

SHARP LAW LLP

4820 W 75th Street

Prairie Village, KS 66208

Telephone: (913) 901-0505

idiel@midwest-law.com

LARRY D. LAHMAN

MITCHELL DE CLERCK

202 West Broadway Avenue

Enid, OK 73701

Telephone: (580) 498-1787

larry.lahman@sbcglobal.net

CHRISTOPHER T. MICHELETTI

JUDITH A. ZAHID

QIANWEI FU

ZELLE LLP

555 12th Street, Suite 1230

Oakland, CA 94607

Telephone: (415) 633-1912

cmicheletti@zelle.com

jzahid@zelle.com

qfu@zelle.com

DENNIS M. GEORGE

ARANGIO GEORGE, LLP

2000 Market Street, Suite 1440

Philadelphia, PA 19103

Telephone: (215) 567-1999

dgeorge@arangiogeorge.com

DONALD C. KLAWITER

STERLINGTON, PLLC

228 Park Ave S

New York, NY 10003

Telephone: (202) 468-5222

dklawiter@sterlington.net

THOMAS P. THRASH

THRASH LAW FIRM, P.A.

1101 Garland Street

Little Rock, AR 72201

Telephone: (501) 374-1058

tomthrash@thrashlawfirmpa.com

CHARLES D. GABRIEL

CHALMERS & ADAMS, LLC

North Fulton Satellite Office

5805 State Bridge Road #G77

Johns Creek, GA 30097

Telephone: (678) 735-5903

cdgabriel@chalmersadams.com

STEPHEN B. MURRAY, SR.

STEPHEN B. MURRAY, JR.

MURRAY LAW FIRM

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New Orleans, LA 70130

Telephone: (504) 525-8100

smurray@murray-lawfirm.com

smurrayjr@murray-lawfirm.com

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.