Petition for Writ of Certiorari — TAM Travel, Inc. v. American Airlines, Inc.

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Supreme Court US.

S/ 7 sas

No. _ _

MAR 18 2019

OFFICE OF THE CLERK

Bn The

Supreme Court of the Anited States

$$. §@ —__ —__

TAM TRAVEL, INC., ef a/..

Petitioners,

DELTA AIR LINES, INC., et al.,

Respondents.

——

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Sixth Circuit

PETITION FOR A WRIT OF CERTIORARI

JOSEPH M. ALIOTO, JR.

Counsel of Record

JOSEPH M. ALIOTO, SR.

THOMAS PAUL PIER

ALLOTO LAW FIRM

555 California Street

Thirty-First Floor

San Francisco, California 91104

(415) 434-8900

J Aliotod r@AliotoLaw.com

Counsel for Petitioners

COCKLE LAW BRIEF PRINTING CO) S00) 225-696

OR CALL COLLECT (4ev) 342-089]

QUESTIONS PRESENTED

1. To satisfy the pleading requirements of Bell

Atl. Corp. v. Twombly and allege a “plausible” price-

fixing conspiracy in violation of Section 1 of the Sher-

man Act, must a complaint allege facts that “tend to

exclude the possibility that defendants acted inde-

pendently”?

2. Ina continuing conspiracy among purchasers

to fix artificially low prices for the services they buy,

does a conspirator commit an “overt act” each time it

purchases the price-fixed service at the artificially

low conspiracy rate?

PARTIES TO THE PROCEEDINGS

Petitioners in this Court, plaintiffs-appellants

below, are Tam Travel, Inc. d/k’a Tamalpais Travel:

Travel Goddess, Inc. d/b/a Uniglobe Happy Travel.

MZZO, Inc. d/b/a Beyond Travel; Bonanza World

Travel, Inc.; TJ Kap, Inc. d/b/a Master Kilby’s Travel!

d/b/a Sportsman’s Travel d/b/a Master Travel; A Team

Travel, Inc. d/b/a A Team Travel; A&W Travel, Inc..

Katherine Arcell. an individual; Christine Whalen, an

individual; Brenda K. Davis and Associates, Inc. d/b/a

All Destinations Travel; Allways Travel, Inc.; Breton

Village Travel Services, Inc. d/b/a Eastlake Travel

Services; Eastlake Travel Services, Inc.; Village Travel

Services, Inc.; Adventure Travel, Inc. d/b/a Carlson

Wagonlit Travel; Garavanian Travel, Inc. d/b/a Carl-

son Wagonlit Travel; Talson, Inc. d/b/a Carlson

Wagonlit Travel d/b/a Travel Agents International:

Compass Ltd. d/b/a Ambassador Travel; Deluxe

Travel, LLC d/b/a Deluxe Travel Ltd.; Destinations,

Inc. d/b/a Destinations, Inc., A Travel Company; Exce!

Travel, inc.; ETC Holdings, Ltd. d/b/a Executive

Travel Consultants, Ltd.; Rozanne Kunstle, an indi-

vidual d/b/a Express Travel; Steven Kunstle, an indi-

vidual d/b/a Express Travel; Gidden, Inc. d/b/a

Express Travel; Five Star Travel, Inc.; CBD, Inc. d/b/a

A Better Way Travel Service d/b/a A Better Way

Travel d/b/a A Better Way Travel Service d/b/a

Garden of the Gods Travel Service d/b/a Garden of the

Gods Travel d/b/a Garden of the Gods Travel Agency:

John R. Denny, an individual, d/b/a Garden of the

PARTIES TO THE PROCEEDINGS - Continued

Gods Travel, d/b/a Garden of the Gods Travel Service,

d/b/a A Better Way Travel, d/b/a A Better Way Travel

Service; Y. Jocelyn Gardner, a sole proprietor d/b/a

Gateway Travel and Cruises, Inc. d/b/a Gateway

Travel Services; Gateway Travel and Cruises, Inc.;

Gateway Travel, Inc. d/b/a Gateway Travel and

Cruises; Lago Travel, Inc.; Mad Travel, Inc.; Marina

Benz, an individual; Camelot Tours, Inc. d/b/a

Marina’s Travel; Rosemary D’Augusta, an individual

d/b/a Perna Travel Service d/b/a Perna Golf Adven-

tures d/b/a Travelbroker.com; Professional-World

‘travel, Inc.; Red Bird Travel Service, Inc. d/b/a Red

Bird Travel Plus; Go Everywhere, Inc. d/b/a Riverside

Travel Group d/b/a Riverside Travel; Rubinsohn

Travel, Inc. d/b/a Rubinsohn Travel Service; Sondra

Russell, an individual d/b/a Sandy’s Get Away Travel:

Silhouette Travel, Inc.; June Stansbury, an individual

d/b/a Stansbury Travel d/b/a Stansbury Sterling

Travel; Stansbury Travel, Ltd.; Stansbury Travel,

LLC; Nancy Walker and J. Michael Walker, a part-

nership d/b/a Sunset Travel; UAT, Inc. d/b/a The

Travel Store; Thomas Travel of American Fork, Inc.;

Tour West Travel of American Fork, Inc.; LWK

Corporation d/b/a Tennessee Valley Travel Agency;

Imperial Travel by Dana, LLC d/b/a Universal Travel;

Travel by Dana, Inc.; Destinations Resort Reserva-

tions, Inc. d/b/a Greenwood Travel; The Travel Cen-

ter, Inc.; Carolyn Fjord, an individual d/b/a Travel

Express; Travel King, Inc.; Lee Gentry, an individual

PARTIES TO THE PROCEEDINGS - Continued

d/b/a Travel King; Nancy Riesch, an individual d/b/a

Travel Plus; Travel Plus, NAR, Inc. d/b/a Travel] Plus;

Travel Professionals, Inc.; Travel Travel, Inc. d/b/a

Travel Travel Erindale Sq.; WNMP Travel, Inc. d/b/a

Uniglobe Professional Travel; Vidal Travel, Inc.;

Talgood Enterprises, Inc. d/b/a Talgood Travel; World

Traveler, Inc. d/b/a Summerlin Travel d/b/a Carlson

Wagonlit Summerlin Travel d/b/a Green Valley Travel

d/b/a Carlson Wagonlit Green Valley Travel; World

Travelers, Inc. d/b/a Travel, Inc. d/b/a Carlson Wagon-

lit Travel/Travel, Inc. d/b/a Summerlin Travel d/b/a

Carlson Wagonlit Summerlin Travel d/b/a Green

Valley Travel d/b/a Carlson Wagonlit Green Valley

Travel; Satellite Travel Systems, Inc.

Respondents in this Court, defendants-appellees

below, are American Airlines, Inc.; Continental Air-

lines, Inc.; and United Air Lines, Inc.

The following airlines are not parties here, but

were defendants-appellees below: Alaska Air Group,

Inc.; Alaska Airlines, Inc.; Horizon Industries, Inc.;

America West Airlines, Inc.; ATA Airlines, Inc.;

Hawaiian Airlines, Inc.; Air Canada; Delta Air Lines,

Inc.; Northwest Airlines, Inc.; KLM Royal Dutch

Airlines; US Airways, Inc.; ad US Airways Group,

Inc.

While the appeal below was pending, defendant-

appellees Frontier Airlines, Inc. and ATA Airlines,

PARTIES TO THE PROCEEDINGS - Continued

Inc. filed petitions for relief under Chapter 11 of the

bankruptcy code and this appeal has been held in

abeyance as to those airlines only.

RULE 29.6 CORPORATE

DISCLOSURE STATEMENT

Pursuant to Supreme Court Rule 29.6, no peti-

tioner has a parent company and no publicly held

company owns 10% or more of any petitioner’s stock.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ..........................20000e0e i

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

RULE 29.6 CORPORATE DISCLOSURE STATE-

es censhenennsoaeoesens v

TABLA OF AUT HORIT ISS .......20.0000.0cccececesccsesceses Vill

ee 1

nS A 1

STATUTORY PROVISIONS INVOLVED ............. 1

STATEMENT OF THE CASE......................ccccceeeees 2

SII os ccnsseecocsseceverssresecerooeses 5

B. The Lower Courts’ Rulings....................... a cae

REASONS FOR GRANTING THE PETITION..... 18

I. Review Is Warranted To Resolve A Conflict

Between The Sixth Circuit’s Decision And

Decisions From The Second Circuit And

This Court Regarding An Important And

Recurring Issue Of Antitrust Conspiracy

Eh 18

A. The Sixth Circuit's New Pleading Rule

Directly Conflicts With Decisions Of

The Second Circuit And This Court,

And It Conflicts In Principle With De-

cisions From The Third, Ninth, And

Cee ia seeeimenanenene 19

B. The Sixth Circuit’s New Pleading Rule

Involves An Important Recurring Issue

I II iio ccnncscrenieuevesvooessuereseee 27

Vil

TABLE OF CONTENTS — Continued

Page

II. Review Is Independently Warranted To Re-

solve A Conflict Created By The Sixth

Circuit’s Decision With Decisions Of The

Fourth And Eighth Circuits And With

Decisions Of This Court Regarding The

Proper Pleading Of “Overt Acts” In The

Continuing Conspiracy Doctrine................. 30

I il iia ace acccaeiahsaceacesasihndaemsauicasaisaniaes 37

APPENDIX

U.S. Court of Appeals for the Sixth Circuit,

Opinion filed October 2, 2009 ....................ccceeeeeeeees la

U.S. Court of Appeals for the Sixth Circuit,

Judgment filed October 2, 2009 ............00.0..000.2.... 43a

U.S. District Court for the Northern District of

Ohio, Memorandum Opinion and Order filed

ee nn siaucatnmanioueumesebeeseas 44a

U.S. Court of Appeals for the Sixth Circuit,

Denial of Petition for Rehearing En Banc

Od Decemner BG, DOOD.........0.ccccecevesrsecserereveseresers 72a

U.S. District Court for the Northern District

of Ohio, First Amended Complaint filed

NEY SO SIDE io rtcndecsciocicvonas ecindasycdoseraceauitoces 74a

Vili

TABLE OF AUTHORITIES

Page

CASES

Aktieselskabet AF 21. November 2001 v. Fame

Jeans, Inc.

8s Lie om | 27, 28

Am. Tobacco Co. v. United States

oon sc wetnneniarephiooussoeventinnts 20

Ashcroft v. Iqbal

Be EE GER cecrccccveceseccreecevncevsrcoseesuee passim

Bell Atlantic Corp. v. Twombly

| | ___; 5 SRR ene passim

Cosmetic Gallery, Inc. v. Schoeneman Corp.

Ce Ej ae 28

C-O-Two Fire Equip. Co. v. United States

197 F.2d 489 (9th Cir. 1952), cert. denied,

a sccctseaidneinciseepiaaesomenwnnnianens 29

Erickson v. Pardus

a eernuniiesunn 26

Golden Bridge Tech. Inc. v. Motorola Inc.

BET FBG Bie OE Ce, FOGG) occccevccevcvveccccccsscsseevesess 28

Hail v. United Air Lines, Inc.

296 F.Supp.2d 652 (E.D.N.C. 2003)..............22.. 12, 13

In re: Cotton Yarn Antitrust Litig.

505 F.3d 274 (4th Cir. 2007) ..........ccccsccccceserceees 33, 34

In re Elevator Antitrust Litig.

we ee | ee 27, 28

Kendall v. VISA U.S.A., Inc.

Be Be Pee |) 27

TABLE OF AUTHORITIES - Continued

Page

Klehr v. A.O. Smith Corp.

BOERNE D pinvcvsssccereesesstererseore 4, 32, 33, 34, 35

Lawlor v. Loewe

209 F. 721 (2nd Cir. 1913), aff’d,

SE A, TEE CIO oseciccontenescssnvesvesncessveeversecneusaeaaie 20

Mandeville Island Farms v. American Crystal

Sugar Co.

i © RN vi recevnvecvesdevscovvovecresseveieemieaae 34

Monsanto Co. v. Spray-Rite Service Corp.

Ee FUE CRUE oantcecceverseccovescocvscvones 15, 18, 19, 22

Morton’s Market, Inc. v. Gustafson’s Dairy, Inc.

198 F.3d 823 (11th Cir. 1999).........................2..82, 33

Northern Pac. Ry. Co. v. United States

NS 0 ED oscoversvvecrvevrssecessvveceranedureaseuae 29

O’Loghlin v. County of Orange

Bae 6-00 Of bk (BER Cir. 2000) ........020-00000ccossoveress 35, 36

Re/Max Int'l, Inc. v. Realty One, Inc.

173 F.3d 995 (6th Cir. 1999) ..........0........2..cceeee 15, 22

Sheridan v. Marathon Petroleum Co.

5B0 F.54 S00 (7th Cir. 2008) ...........ceovecrevovsvevssseeenees 28

St. Clair v. Citizens Fin. Group

No. 08-4870, 2009 U.S.App.LEXIS 16465

EE, UD, BI occeventsvesssvevercovetvessammmana 27

Starr v. Sony BMG Entm'

08-5637, 2010 U.S.App.LEXIS 768

cos ss viceesresys navocutuesenrcvereedestalaeaman 18, 23

TABLE OF AUTHORITIES —- Continued

Page

Theatre Enters., Inc. v. Paramount Film

Distrib. Corp.

EI I 19

Tunica Web Advertising v. Tunica Casino Op-

erators Assoc., Inc.

496 F.3d 403 (5th Cir. 2007) .20.0....0... 0c cee cece eeece eee ee 28

United States v. Am. Airlines, Inc.

ES | | 7

United States v. Borden Co.

EE >

United States v. Topco Assoc., Inc.

nO scensusntorsveveosnrvoene 29

Zenith Radio Corp. v. Hazeltine Research, Inc.

a 4,31

STATUTES

ES passim

a cusuumeownntensennede 1

BiLLS

Notice Pleading Restoration Act of 2009, S.

EE 28

Open Access to Courts Act of 2009, H.R. 4115,

EE 29

TABLE OF AUTHORITIES — Continued

Page

OTHER AUTHORITIES

Lee Goldman, Trouble for Private Enforcement

of the Sherman Act: Twombly, Pleading Stan

dards, and the Oligopoly Problem, 2008

he Sh "Sg | (Sasser eee 23

PHILLIP E. AREEDA & HERBERT HOVENKAMP,

ANTITRUST LAW (3d ed. 2007) ........................ eee 26, 34

PHILLIP E. AREEDA & HERBERT HOVENKAMP.

ANTITRUST LAW (rev. ed. 1995)... Care oy

Petitioners respectfully pray that a writ of certio-

rari issue to review the judgment of the United States

Court of Appeals for the Sixth Circuit in this case.

OPINIONS BELOW

The opinion of the Court of Appeals is reported at

583 F.3d 896. Appendix to Petition for Writ of Certi-

orari (“App.”) la-42a. The opinion of the district court

(App. 44a-71a) is unreported.

iy ee

JURISDICTION

The Court of Appeals entered its judgment on

October 2, 2009. App. 43a. The court denied a timely

petition for rehearing with a suggestion for rehearing

en banc on December 18, 2009. App. 72a-73a. The

jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254/1).

STATUTORY PROVISIONS INVOLVED

Section 1 of the Sherman Act, 15 U.S.C. § 1, pro-

vides 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 hereby declared to

be iljegal.”

iY)

STATEMENT OF THE CASE

In Bell Atlantic Corp. v. Twombly, 550 U.S. 554

(2007), this Court granted certiorari to address the

sufficiency of pleading a price-fixing conspiracy in

violation of Section 1 of the Sherman Act,

establishing the now famous “plausibility standard.”

Id. at 556. Two years later, the Court clarified its

decision in Ashcroft v. Igbal, 129 S.Ct. 1937, 1950

(2009), explaining that in order to state a claim for

antitrust conspiracy, a complaint fails if it merely

alleges that the defendants acted in parallel. This

case represents the next step in the refinement of the

Court’s new standard. Whereas Twombly and Igbal

offer examples of complaints that fail to demonstrate

plausibility, the complaint here presents the Court an

opportunity to further shape the standard’s boundaries

using allegations that plausibly suggest conspiracy.

In Twombly, the plaintiff supported its

conspiracy allegation merely by alleging that the

defendants acted in parallel. But the Court -

observing that “parallel conduct without more” is as

consistent with competitive behavior as it is with

conspiratorial behavior — held that a complaint must

also plead facts that place the parallel conduct “in a

context that raises a suggestion of a preceding

agreement.” Twombly, 550 U.S. at 557. Here, the

complaint readily surmounts the Twombly require-

ment, alleging — among other facts — the specific

dates, participants, and locations of meetings among

the defendants where they discussed and voted to fix

prices immediately before the prices simultaneously

increased. In the dissent’s view, the complaint

“creates an overwhelming case for the plaintiff to get

by a motion to dismiss on the pleading,” “so plain a

case that |the defendants] might as well have put the

plan in writing.” App. 35a-36a. But, relying on sum-

mary judgment law, the majority contorted 7wombly’s

observation about “parallel conduct, without more”

and misread that case and Igba/ as issuing a license

for lower courts to determine, for themselves,

whether the parallel conduct was “more likely

explained by” the complaint’s allegations or by the

defendants’ innocent explanations. By applying

summary judgment law to the complaint — which

requires evidence that “tends to exclude the

possibility that defendants acted independently” — the

Sixth Circuit crafted a new rule that flies in the face

of Twombly’s admonitions not to “impose a probability

requirement” or “apply a_ heightened pleading

standard.” 550 U.S. at 556, 569 n. 14.

The Sixth Circuit’s wayward interpretation of the

plausibility standard also directly conflicts with a

decision from the Second Circuit that flatly rejected

the same rule adopted by the court below. The

holding here also conflicts with the reasoning of

decisions from the Third, Ninth and District of

Columbia Circuits, all of which have correctly

interpreted the Jivomb/y standard. It is no secret that

the lower courts, especially the trial courts, have

struggled with understanding the plausibility stan-

dard in Tiwombly, which has already been cited over

20.000 times in cases and comments. Even here, the

district court freely admitted to what it perceived to

be a “contradiction” between Twombly and Rule 8’s

requirement of a “short plain statement.” The Sixth

Circuit’s decision in this case will only serve to

greatly increase this uncertainty. As the dissent

below correctly observed, “[t/he uniformity needed for

the rule of law and equal justice to prevail is lacking.”

App. 39a. This case, a price-fixing conspiracy case

like Twombly, presents an ideal opportunity to bring

consistency to the application of the plausibility

standard.

The Sixth Circuit's decision also creates a conflict

in the circuits concerning the law of continuing

antitrust conspiracies, and it independently warrants

this Court’s review. Under Zenith Radio Corp. v.

Hazeltine Research, Inc., 401 U.S. 321 (1971) and

Klehr v. A.O. Smith Corp., 521 U.S. 179 (1997), a new

cause of action accrues each time the defendant

transacts for a product or service at a price that has

been set by an illegal agreement — even if the

agreement itself is many years old. The Fourth and

Eleventh Circuits have issued decisions in accord

with this established law. But the Sixth Circuit,

making its own policy choice, held that the

defendants here did not commit “overt acts” when

they purchased the plaintiffs’ services at prices set by

illegal conspiracy.

The Court should grant the petition and act

decisively to reverse the decision below. If there is

any doubt here about whether review should be

granted, the Court should invite the Solicitor Genera!

to express the views of the United States.

A. Factual Background

This case is brought by forty-nine independent

travel agents and agencies (“Travel Agents”) against

sixteen passenger airlines (“Airlines”), alleging a con-

tinuing seven-year conspiracy to fix the commission

rates paid by Airlines in return for travel services

provided by the Travel Agents.

Before 1978, the passenger airline industry was

regulated by the government, and travel agent com-

mission rates were fixed at 7%. Vol. III] Court of

Appeals Joint Appendix (“Jt.App.”) 666. However,

once the industry was deregulated, free-market com-

petition was allowed to thrive and commissions were

driven up to over 10% as passenger airlines sought to

increase their ticket sales and market shares. /d.

Travel agents have been an integral part of the

airlines’ sales strategy for many years. In 1999, travel

agents booked over 80% of all domestic full-service

tickets CII Jt.App. 700, 702), and during the time

relevant to this case, travel agents continued to

“write and/or influence the material percentage” of

the airlines’ business. II] Jt. App. 657, 671. The air-

lines have traditionally paid commissions because

they provide important incentives to travel agents,

who will book more tickets on airlines that pay them

for their services. Complaint (“Compl.”) 4944 88, 89;

App. llla-112a.

In 1981, three years into deregulation, United

unilaterally cut travel agent commissions by impos-

ing a flat fee for booked tickets. Compl. 4 83; App.

110a. However, the other airlines continued to pay

competitive commission rates and refused to follow

United’s move. /d. As a result, United experienced

business losses created by travel agents shifting

business to those airlines that continued to pay for

travel agent services. Jd. Within five days of its enact-

ment, United was forced to recant the commission cut

in order to stem further sales losses. /d.

In 1983, American made a similar attempt,

announcing a commission cut from 10% to 7%. Compl.

{ 84; App. 110a. The response from the travel agent

community was “vitriolic” and travel agents threat-

ened to “book away” travel to other airlines that con-

tinued to pay commissions. Jd. As economics would

predict, no other airline followed American’s com-

mission cut. Jd. To stem further losses, American

recanted the cut because, according to Michael Gunn,

the executive partly responsible for setting commission

rates, “I felt I would lose a lot of revenue to my

competitors by being noncompetitive on the commis-

sion front....” III Jt.App. 669. Mr. Gunn testified

that the commission reduction resulted in “damage”

to American’s “reputation with the travel agency

community” that it was “not anxious” to repeat, since

“travel agencies write and/or influence the material

percentage of” airline travel. III Jt.App. 670-671.

American's president, Robert Crandall, was ulti-

mately responsible for approving American's travel

agent commission rates. Compl. 4 23; App. 92a. Mr.

Crandall has a history of attempted price-fixing. Jd.

In the mid-1980’s, he was implicated in a price-fixing

and monopoly conspiracy case brought by the Depart-

ment of Justice in which he was caught on audio tape

attempting to fix prices with his competitor, Braniff

Airlines’ president Howard Putnam:

Crandall: I have a suggestion for you. Raise

your goddamn fares twenty per-

cent. I'll raise mine the next

morning.

Putnam: Robert, we —

Crandall: You'll make more money and I will

too.

Putnam: We can't talk about pricing.

Crandall: Oh bullsh**, Howard. We can talk

about any goddamn thing we

wunt io talk about.

Compl. 4 23; App. 92a; United States v. Am. Altrlines,

Inc., 743 F.2d 1114, 1116 (5th Cir. 1984). Twice in this

case, in 1995 and 1997, Mr. Crandall would approve

American’s commission cuts using the same modus

operandi of following the leader “the next morning.”

The conspiracy alleged in this case began in 1995

when Delta capped commissions at $25. Compl. 4 26;

App. 93a. A commission “cap,” rather than a per-

centage reduction, was a significant departure from

normal business practice. Compl. 4 104; App. 116a. In

fact, so unusual was Delta’s proposed commission

structure that Mr. Gunn testified that the day Delta

announced its cut, he had “never done any analytical

analysis predicated on such a structure.” III Jt.App.

696. Mr. Gunn’s boss, Mr. Crandall, nevertheless

authorized American to match Delta’s move “the next

morning” — just as he had illicitly proposed to

Braniff.. Compl. 7 103; App. 115a-116a; III Jt.App.

699, 531-532. United and Continental, among other

major airlines, followed Delta’s lead within days.

Compl. {4 31, 104; App. 94a, 116a. The speed at

which the Airlines followed Delta’s commission cut

did not allow them the time necessary to

independently determine whether the move was

financially sound. Compl. 4 103; App. 115a-116a.

The conspiracy continued into 1997. On May 27

and 28, 1997 at a meeting of the International Air

Transport Association (“IATA”) in Montreal Canada,

representatives from United, Delta, KILM, Air Canada

and others discussed whether they should agree to

lower commissions paid to travel agents outside the

United States. Compl. 4 97; App. 113a-114a. At this

meeting, the Airlines “communicated with one another

for the purpose of developing ... [and] implementing

... their common plan to reduce, cap and eliminate

’ At around the same time, the Airlines settled a case

alleging a price-fixing conspiracy among the Airlines involving

the use of computer reservation systems to signal ticket price

changes. Compl. 7 24; App. 92a-93a. The Department of Justice

is currently investigating other price-fixing conspiracies involv-

ing many of the airlines here. Compl. 9 25; App. 93a.

commissions....” Compl. 491; App. 112a. A few

months later, United announced a commission reduc-

tion from 10% to 8%. Compl. 4 34; App. 95a. Notably,

United made its cut effective the next day, preventing

it from “waiting and seeing” whether the other

Airlines would follow. Jd. Two business days later,

American and Delta matched the cut precisely, also

effective the same day. Compl. 94 35, 36; App. 95a-

96a. Mr. Crandall again authorized American’s move.

III Jt.App. 531-532. Northwest followed the next day

and Continental the day after that. Compl. 9] 37-38;

App. 96a. The Airlines followed United’s cut before

they would have been able to rationally analyze

whether the commission cut was economically bene-

ficial. Compl. 44 37-42, 46; App. 96a-97a, 98a-99a.

In July, 1998 representatives responsible for

setting the travel agent commission rates for Ameri-

can, United, Air Canada, Delta, Northwest and others

met in Singapore at an [ATA meeting at which they

discussed, voted on and agreed to fix travel agent

commissions at 9% in markets outside the United

States. Compl. 4 98; App. 1l4a. At this meeting, the

Airlines communicated with one another “for the pur-

pose of developing [and] implementing . . . their com-

mon plan... .” Compl. 4 91; App. 112a. Four months

later, United announced a commission cap which

became effective the same day. Compl. 4 44; App.

98a. Three days later, again like 1997, American and

Delta followed suit. Compl. {4 45-46; App. 98a-99a.

Continental joined three days after that. Compl. ¥ 47;

App. 99a. The speed at which American, Delta and

Continental followed United’s reduction did not allow

each airline the time necessary to make a rational

independent decision. Compl. ¥ 103; App. 115a-116a.

In August, 1999 representatives responsible for

setting travel agent commissions for United, Air Can-

ada, American, Delta, KLM, and Northwest among

others, met in Montreal, Canada at an IATA meeting

to discuss setting travel agent commissions. Compl.

¥ 101; App. 115a. There, the group voted and agreed

to stop paying commissions as a group to travel

agents outside the United States. Jd. At roughly the

same time, representatives fur American, United,

Continental, Delta, and Northwest formed Orbitz, an

online ticketing website that competes against travel

agents. Compl. { 99; 114a. The executives represent-

ing the various airlines on Orbitz’s board of directors

were the same executives responsible for setting their

respective airline’s commission rates. Jd. They met

once every two months. III Jt.App. 533-538, 559.

Three months later, as in the past, United led a com-

mission reduction in the United States from 8% to

5%, effective the following day. Compl. 4 51; App.

100a. Once again, American matched within 24

hours. Compl. { 52; App. 100a. Continental and Delta

followed within four days. Compl. {4 53-56; 100a-

102a. The Airlines acted so closely in time that they

could not have been able to independently assess

whether following the commission reduction was in

their best interest. Compl. 9 103; App. 115a-116a.

In April, 2001, the American and Delta repre-

sentatives responsible for setting travel agent com-

missions met in Las Vegas, where they spent two or

more days together, alone on a golf course. Compl.

q 102; App. 115a; III Jt-App. 537, 546, 564-565. Four

months later, American announced a commission cap

effective the following day, and Delta was the first to

follow three business days later. Compl. {J 61-63;

App. 103a-104a. It was the first time American had

led a commission cut since its failed attempt almost

two decades earlier in 1983. Compl. 4 23; App. 92a.

United matched the commission cap the same day as

Delta, and Continental followed 4 days later. Compl.

{{] 62, 65; App. 103a-104a.

Delta led the ultimate elimination of commis-

sions in March, 2002. Tellingly, other Airlines knew

Delta would eliminate commissions before it was

announced. On March 4, 2002 in San Francisco, a

representative of Orbitz told a travel agent that

“something big is about to happen that will make

Orbitz number 1.” Compl. 4 108; App. 116a-117a.

Around the same time, a sales representative of

United told several travel agents that Delta was

about to eliminate commissions. Compl. 4 107; App.

116a. On March 14, 2002 Delta announced the elimi-

nation of commissions, from 5% to 0%, effective the

same day. Compl. { 71; App. 106a. American and Con-

tinental matched the next business day. Compl.

47 72, 75; App. 106a-108a. United followed two days

later. Compl. 9 73; App. 107a.

Having created, implemented and enjoyed the

fruits of their conspiracy, some of the Airlines filed for

voluntary bankruptcy under Chapter 11 of the

Bankruptcy Code.* Compl. 94 109-116; App. 117a-

118a. However, when they emerged from bankruptcy,

these airlines continued to participate in the con-

spiracy by continuing to accept Travel Agents’ ser-

vices without paying for them. Compl. 4] 117-119;

App. 118a. At no time did any of these airlines affir-

matively disavow the conspiracy or take any action to

withdraw from it. Compl. 7 119; App. 118a.

B. The Lower Courts’ Rulings

The Travel Agents sued under Section 1 of the

Sherman Act, 15 U.S.C. § 1, alleging the Airlines con-

spired to cut and eventually eliminate the payment of

commissions. As was their right under the federal

rules, Travel Agents opted out of a putative class

action captioned Hall v. United Air Lines, Inc., 296

F.Supp.2d 652 (E.D.N.C. 2003), which alleged a con-

spiracy to cut and eliminate commissions based on

the same facts as the present case. The Hall case

involved extensive discovery, including some twenty

or more depositions and over one million pages of

documentary discovery. Although Hall was ultimately

dismissed at summary judgment, Travel Agents opted

out of that case well before any disposition. The

allegations in Travel Agents’ complaint are based

* Relevant on this appeal is United.

largely on factual revelations — including specific

meeting times, places, participants, and topics dis-

cussed — gleaned from the many depositions, meeting

minutes, notes, presentations and other evidence

from the Hall discovery.

Airlines answered the complaint and limited dis-

covery ensued.’ In June, 2007 Airlines filed a motion

for judgment on the pleadings, asserting the com-

plaint failed to meet the standard of this Court’s

Twombly decision, issued the previous month. The

district court directed Travel Agents to file an

amended complaint in light of Twombly and Airlines’

motions were renewed.

The district court granted Airlines’ motions, hold-

ing that the allegations failed to satisfy the Twombly

standard. However, the district court admitted to

some confusion about 7wombly’s parameters, openly

questioning the vitality of Rule 8’s “short plain

statement” and stating “although the Supreme Court

says Rule §& still exists, I think there is a contra-

diction in the case....” III Jt.App. 778. Seemingly

persuaded by the plaintiffs’ failure in Hall rather

than the sufficiency of the allegations, the district

* To prevent duplication of the Hall discovery, the district

court limited document production to that already compiled in

Hall and depositions were limited to one “decision-maker” per

airline. Travel Agents were only allowed to take one deposition

before dismissal. I Jt.App. 105 (District Court’s Order on Motion

to Stay Discovery, p. 2); | Jt-App. 106-108 (District Court’s Order

on Motion to Compel Discovery, pp. 1-3).

court dismembered each group of allegations. First,

isolating the parallel conduct allegations, it held

them “alone not enough to meet the requirements

under Twombly.” App. 64a (emphasis added). Second,

isolating the meeting allegations — which depicted the

specific time, place, and person involved in meetings

that immediately preceded each commission cut — the

district court held that “opportunity to conspire, with-

out more, does not suggest that there was an agree-

ment to reduce commissions.” App. 66a. Third, the

complaint alleged that the Airlines’ actions would

only be economically rational if they acted in concert.

To that, the district court held that Travel Agents’

allegation “is not grounded in fact” (App. 66a),

because it “only rellies} on United and American’s

failed attempt to institute commission reductions in

the 1980’s.” App. 66a. Fourth, the court found that

Mr. Gunn’s “deposition testimony indicates that ...

there was no agreement or conspiracy.” App. 68a-69a.

The district court also held that the claim must

be dismissed as to the previously-bankrupt airlincs.

It reasoned that the last overt act committed by these

airlines was the pre-bankruptcy “commission reduc-

tion” of March, 2002 (App. 59a); therefore, the claim

“has been discharged by the bankruptcy court.” App.

55a. The court held that “even if the airlines

continued to participate in the conspiracy alleged by

plaintiffs after having emerged from bankruptcy, that

fact alone would not give rise to a new antitrust

claim.” App. 58a.

In a 2-1 decision, the Sixth Circuit affirmed. The

majority opinion began its analysis of the complaint

by citing Monsanto Co. v. Spray-Rite Service Corp.,

465 U.S. 752 (1984), a summary judgment case. App

22a. Quoting Monsanto, 465 U.S. at 768, the majority

wrote:

The correct standard is that there must be

evidence that tends to exclude the possibility

of independent action. .. .

App. 22a (emphasis in majority opinion). The ma-

jority also cited the legal standard from its decision in

Re/Max Int'l, Inc. v. Realty One, Inc., 173 F.3d 995

(6th Cir. 1999), another summary judgment case. The

majority justified its reliance on summary judgment

law by claiming it was necessary to interpret Thoombly,

writing “it illuminates the plausibility of defendants’

lawful, unchoreographed free-market behavior.” App.

23a, n. 7. Thus, rather than analyze the plausibility

of the conspiracy inference based on allegations in the

complaint — as Twombly required — the majority in

stead analyzed the plausibility of defendants’ inno-

cent explanations.’ Giving evidentiary weight to these

explanations, the majority procluimed them to be

“especially plausible” (App. 25a) and found that

“defendants have offered a reasonable, alternative

explanation for their parallel pricing behavior.” /d.

4 “ ° ”

These “explanations” consist of factual accounts found in

the Airlines’ motion to dismiss briefs that purport to explain the

Airlines’ behavior as “innocent.”

Ultimately finding the Airlines’ explanations more

persuasive than the allegations in the complaint, the

majority concluded: “[blased on these facts, we con-

clude that each defendant had a reasonable, inde-

pendent economic interest in adopting a competitor's

commission cut rather than to maintain the status

quo.” App. 26a. Distilling its analysis into a legal rule,

it held:

We therefore hold that plaintiffs have failed

to allege sufficient facts plausibly suggesting

(not merely consistent with) an agreement in

violation of § 1 of the Sherman Act because

defendants’ conduct was not only compatible

with, but instead was more likely explained

by, lawful, unchoreographed free-market be-

havior.

App. 26a (citation omitted).

With respect to the previously-bankrupt Airlines,

the Sixth Circuit recognized the “continuing conspiracy”

doctrine in antitrust law, and that a new cause of action

accrues with the commission of each overt act. App.

10a-lla. The court conceded that the purchase of a

price-fixed product is, as a matter of law, an overt act.

Id. The lower court further recognized that a violation

begun pre-bankruptcy can continue post-bankruptcy

if overt acts are committed after discharge. Id.

Nevertheless, it held the Airlines had committed no

overt acts post-bankruptcy, since each time they

accepted Travel Agents’ services without paying for

them, the Airlines were “merely reaffirm[ing] a

previous act,” and not committing a new act. App.

lla.

Judge Merritt dissented, concluding that “|tlhe

factual allegations in this case create an overwhelm-

ing case for the plaintiff to get by a motion to dismiss

on the pleading.” App. 35a-36a. Describing the com-

plaint, he determined that “the facts alleged present

so plain a case that |the Airlines] might as well have

put the plan in writing” — “[nJot as strong as alle-

gations raising an inference that ‘the sun will rise in

the morning’ based on history, but strong enough to

be more than ‘plausible.’” App. 36a. The complaint

included “specific, time-and-place factual allegations”

that the Airlines “met frequently over the period the

airlines were acting in unison and according to plan.”

App. 37a. Judge Merritt correctly noted that the

complaint “provides specific times and locations of

numerous meetings attended by the defendants ...

and most importantly, the complaint ties the dates of

those meetings with industry-wide simultaneous rate

cuts that followed immediately thereafter.” App. 38a.

He concluded, “|rjJeading these allegations as a whole,

the complaint clearly satisfies the Twombly stan-

dard.” The dissent specifically criticized the majority’s

application of the wrong legal standard:

Here my colleagues have seriously mis-

applied the new standard by requiring not

simple “plausibility,” but by requiring the

plaintiff to present at the pleading stage a

strong probability of winning the case and

excluding any possibility that the defendants

acted independently and not in unison.

App. 34a. Noting the numerous incidents of

Twombly’s misapplication in the lower courts, the

dissent called upon t*sis Court to “make it clear that

Twombly may not be used, as my colleagues propose,

as a cover for repealing” the antitrust laws. App. 42a.

REASONS FOR GRANTING THE PETITION

I. Review Is Warranted To Resolve A Con-

flict Between The Sixth Circuit’s Decision

And Decisions From The Second Circuit

And This Court Regarding An Important

And Recurring Issue Of Antitrust Con-

spiracy Pleading

According to the Sixth Circuit’s new rule, if a

complaint satisfies Twombly by alleging facts placing

the defendants’ parallel behavior “in a context that

raises a suggestion of preceding agreement,” Twombly,

550 U.S. at 557, the complaint must nevertheless be

dismissed unless it also “tends to exclude the possi-

bility of independent action.” App. 22a (citing Mon-

santo, 465 U.S. at 768).

The Second Circuit created a direct conflict with

this rule when it flatly rejected it in Starr v. Sony

BMG Entmt, 08-5637, 2010 U.S.App.LEXIS 768, *24

(2nd Cir. 2010), where it held: “{(djefendants ... argue

that a [Sherman Act] plaintiff must allege facts that

‘tend[ ] to exclude independent self-interested conduct

as an explanation for defendants’ parallel behavior.

This is incorrect.”

The rule below also directly conflicts with specific

pronouncements of this Court. Relying on the Mon-

santo summary judgment standard, the Sixth Circuit

held that Travel Agents’ complaint failed to allege a

plausible conspiracy because “defendants’ conduct”

was “more likely explained by” Airlines’ innocent ex-

planations than by the complaint’s well-pled allega-

tions. App. 26a. This holding relies on a subtle, but

meaningful, misquotation from /qbal/ that results in a

grave misapplication of Twombly. By requiring the

complaint to show that defendants’ behavior was

“more likely explained by” illegal conduct than by

innocent conduct, the Sixth Circuit’s rule demands a

showing of probability. It therefore directly conflicts

with Tiwombly’s admonition “not [to] impose a proba-

bility requirement at the pleading stage” or to “apply

any ‘heightened’ pleading standard.” Thombly, 550

U.S. at 556, 569, n. 14.

A. The Sixth Circuit’s New Pleading Rule

Directly Conflicts Wit 1 Decisions Of

The Second Circuit And This Court,

And It Conflicts In Principle With

Decisions From The Third, Ninth, And

D.C. Circuits

The “crucial question” in a Section 1 case is

whether the challenged conduct “stem|s] from inde-

pendent decision or from an agreement, tacit or

express.” Theatre Enters., Inc. v. Paramount Film

Distrib. Corp., 346 U.S. 537, 540 (1954). “(T]he law

does not require the proof of conspiracy by direct and

positive proof” because “[clonspirators do not put

their agreements in writing... .” Lawlor v. Loewe,

209 F. 721, 725 (2nd Cir. 1913), aff’d, 235 U.S. 522

(1915). Rather, a conspiracy may be proven entirely

through circumstantial evidence. Am. Tobacco Co. v.

United States, 328 U.S. 781, 810 (1946). Allegations of

defendants’ “parallel conduct” (e.g., similar pricing or

other market bchavior) is circumstantial evidence

that may be used to support a conspiracy claim. How-

ever, “[w]Jhile a showing of parallel business behavior

is admissible circumstantial evidence from which the

fact finder may infer agreement, it falls short of

conclusively establishing agreement... .” Twombly,

550 U.S. at 553.

The complaint in Twombly “proceed[ed] exclu-

sively via allegations of parallel conduct.” Twombly,

550 U.S. at 565, n. 11. And while “an allegation of

parallel conduct ... gets the complaint close to stat-

ing a claim,” “|wlithout more, parallel conduct does

not suggest conspiracy.” Jd. at 556-557. The Court

held: “when allegations of parallel conduct are set out

in order to make a § 1 claim, they 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.” Jd. at 557. Since

an allegation of parallel conduct “gets the complaint

close to stating a claim,” the minimal additional facts

necessary to state a claim need only “nudge [the]

claim across the line from conceivable to plausible.”

Id. at 570.

The complaint here alleges facts that bulldoze

the claim across the plausibility line creating, in

Judge Merritt’s view, “an overwhelming case for the

plaintiff to get by a motion to dismiss.” App. 36a. The

complaint not only alleges lock-step parallel com-

mission cuts; it alleges facts that place these parallel

moves in a context that suggests conspiracy. For

instance, it alleges the specific date and location of

meetings where participants voted to jointly reduce

commissions immediately before the Airlines simul-

taneously cut commissions. Based on facts from the

industry’s history, the complaint alleges that the

commission reductions were extraordinary departures

from normal business practice, and that the loss of

revenue and market share from leading an un-

matched commission cut created a risk so great that

no rational airline would act without knowing the

others would follow along. The complaint alleged that

the leader of each cut unnecessarily increased the

already substantial risk of business loss by making

the cuts effective the day of their announcement,

needlessly preventing the leader from waiting to see

if others would follow. Each lead cut was followed so

closely in time that no rational firm could timely

analyze the pros and cons of following. The complaint

alleged the craftsmanship of Robert Crandall who,

as the CEO of American, matched the 1995 com-

mission reduction within 24 hours, a modus operandi

strikingly similar to what he illegally proposed over a

surreptitiously tape-recorded conversation with his

competitor just a few years earlier. App. 36a. “Reading

these allegations as a whole, the complaint clearly

satisfies the Twombly standard.” App. 38a. But here,

surmounting Twombly’s requirements was _ not

enough.

The Sixth Circuit began its march toward affirm-

ing dismissal by citing this Court’s decision in Mon-

santo Co. v. Spray-Rite Service Corp., 465 U.S. 752,

768 (1984) — a summary judgment case — and then

adding its own emphasis, the majority quoted the

summary judgment standard from that decision:

The correct standard is that there must be

evidence that tends to exclude the possibility

of independent conduct.

App. 22a (emphasis in majority opinion). The ma-

jority also extensively explained Re/Max Int'l, Inc. v.

Realty One, Inc., 173 F.3d 995 (6th Cir. 1999), another

summary judgment case. Relying on these cases, the

Sixth Circuit held that the complaint did not allege

facts plausibly suggesting a conspiracy because it

failed to exclude the possibility that the Airlines acted

independently.’ App. 25a-26a.

* The dissent correctly summarized the standard employed

by the majority:

[M]y colleagues have seriously misapplied the new

standard ... by requiring the plaintiff to... exclude]

any possibility that the defendants acted independ-

ently and not in unison.

(Continued on following page)

The Second Circuit roundly rejected precisely

this rule in Starr v. Sony BMG Music Entmt, No. 08-

5637, 2010 U.S.App.LEXIS 768 (2nd Cir. Jan. 13,

2010), creating a direct circuit conflict. Just as here,

Starr involved a Section 1 conspiracy complaint that

relicd on circumstantial evidence, including parallel

conduct. But, unlike Twombly, the complaint in Starr

also alleged facts that placed the defendants’ parallel

conduct in a setting that suggested a preceding

agreement, just as here. Jd. at *20-*23. The Starr de-

fendants’ principal argument was precisely the Sixth

Circuit’s holding in this case, that the complaint

should be dismissed because it failed to exclude de-

fendants’ innocent explanations. The Second Circuit

disagreed, holding:

Defendants first argue that a plaintiff seek-

ing damages under Section 1 of the Sherman

Act must allege facts that ‘tend[ ] to exclude

independent self-interested conduct as an ex-

planation for defendants’ parallel behavior.’

This is incorrect.

Id. at *24. The Second Circuit correctly observed that

the defendants’ proposed standard was reserved for

summary judgment and was not to be applied on a

motion to dismiss. /d.

App. 34a. Academic observers have also concluded that this case

erroneously applied the summary judgment standard. Lee

Goldman, Trouble for Private Enforcement of the Sherman Act:

Twombly, Pleading Standards, and the Oligopoly Problem, 2008

B.Y.U.L.Rev. 1057, 1090.

The Sixth Circuit majority attempted to justify

its reliance on the summary judgment standard on

the ground that “it illuminates the plausibility of

defendants’ lawful, unchoreographed free-market be-

havior.” App. 23a, n. 7. And in fact, rather than ana-

lyze the plausibility of the conspiracy inference — as

Twombly required — here, the Sixth Circuit analyzed

the plausibility of innocent explanations proffered by

the Airlines in their briefings. App. 25a-26a. Finding

these explanations “especially plausible,” the majority

asserted that each Airline’s decision to match a com-

mission cut was “arguably a reasoned, prudent busi-

ness decision.” App. 30a (emphasis added). Relying on

these explanations, the majority found that “defen-

dants have offered a reasonable, alternative explana-

tion for their parallel pricing behavior.” App. 26a.

Then, citing Iqbal, the Court of Appeals held:

We therefore hold that plaintiffs have failed

to allege sufficient facts plausibly suggesting

an agreement in violation of § 1 of the Sher-

man Act because defendants’ conduct “was

... more likely explained by lawful, unchore-

ographed free-market behavior.”

App. 26a (quoting Iqbal, 129 S.Ct. at 1950).

Although the majority’s holding relied on the

quoted portion of a sentence from /qgbal, it misquoted

the relevant part, fundamentally altering its mean-

ing. The quoted passage from /gbal used the “more

likely explained by” language only in reference to

“parallel conduct,” not all of “defendants’ conduct.” It

reads in full:

Acknowledging that parallel conduct was

consistent with an unlawful agreement, the

{Twombly| Court nevertheless concluded that

it did not plausibly suggest an illicit accord

because it was not only compatible with, but

indeed was more likely explained by, lawful,

unchoreographed free-market behavior.

Iqbal, 129 S.Ct. at 1950 (emphasis added). Iqbal was

not laying down a new rule; it was simply explaining

what the Court observed in Twombly: that parallel

conduct, without more, is ambiguous evidence:

The inadequacy of showing parallel conduct

or interdependence, without more, mirrors

the ambiguity of the behavior: consistent

with conspiracy, but just as much in line

with a wide swath of rational and competi-

tive business strategy unilaterally prompted

by common perceptions of the market.

Twombly, 550 U.S. at 554 (emphasis added).

This Court never intended these passages to be

read as a license for lower courts to apply the sum-

mary judgment standard at the motion to dismiss

stage, as the foremost antitrust commentators have

explained:

In order to avoid a motion to dismiss, a

plaintiff’s allegations must “plausibly sug-

gest| |” conspiracy. By contrast, in order to

avoid summary judgment, the evidence must

“tend to rule out the possibility that the de-

fendants were acting independently.” Ob-

serve that the Supreme Court [in Twombly]

did not hold that the same standard applies

to a complaint and a discovery record....

The ‘plausibly suggesting’ threshold for a

conspiracy complaint remains considerably

less than the ‘tends to rule out the possi-

bility’ standard for summary judgment.

2 PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTI-

TRUST LAW 4 307d1 (3d ed. 2007) (emphasis in origi-

nal).

The Sixth Circuit’s new rule has interpreted

Twombly in precisely the wrong way, creating a direct

conflict with the law of this Court. By demanding the

complaint to show the conspiracy “was more likely ex-

plained by” illegal conduct as opposed to independent

conduct, it required a showing of probability, which

Twombly specifically denounced. Twombly, 550 U.S.

at 556 (“[alsking for plausible grounds to infer an

agreement does not impose a probability requirement

at the pleading stage ... ”). By requiring the com-

plaint to exclude Airlines’ explanations of the alleged

illegal conduct, it held the complaint to a heightened

pleading standard, which Twombly also specifically

forbade. Id. at 569, n.14 (“we do not apply any

‘heightened’ pleading standard....”); Erickson v.

Pardus, 551 U.S. 89, 93 (2007) (quoting Twombly, 550

U.S. at 555 (“the statement need only ‘give the de-

fendant fair notice of what the ... claim is and the

grounds upon which it rests.’”)).

Other decisions from the Second and Ninth

Circuit, as well as an unpublished opinion from the

Third Circuit have correctly limited the “more likely

explained by” language to complaints that have only

alleged parallel conduct. In re Elevator Antitrust

Litig., 502 F.3d 47, 51 (2nd Cir. 2007); Kendall v.

VISA U.S.A., Inc., 518 F.3d 1042, 1048 (9th Cir.

2008); St. Clair v. Citizens Fin. Group, No. 08-4870,

2009 U.S.App.LEXIS 16465, *7 (8rd Cir. Jul. 23,

2009). And, in a Lanham Act case, the District of

Columbia Circuit has held that “Twombly was con-

cerned with the plausibility of an inference of con-

spiracy, not with the plausibility of a claim. A court

deciding a motion to dismiss must not make any

judgment about the probability of the plaintiff’s suc-

cess.” Aktieselskabet AF 21. November 2001 v. Fame

Jeans, Inc., 525 F.3d 8, 17 (D.C. Cir. 2008).

As Judge Merritt accurately stated as a result of

the majority’s new rule, “[t|he uniformity needed for

the rule of law and equal justice to prevail is lacking.”

App. 39a. To re-establish consistency with the Jower

courts’ interpretation of Twombly and its application

to Section 1 conspiracy complaints, the Court should

grant the petition and reverse the decision below.

B. The Sixth Circuit’s New Pleading Rule

Involves An Important Recurring Issue

Of Antitrust Law

There may be no more fundamental issue in civil

litigation than the requirements for properly pleading

a claim to unlock the doors to discovery and, as

such, this case presents a recurring issue of national

importance to both antitrust cases specifically and

civil cases generally.

The Twombly decision is one of the most dis-

cussed — and misunderstood — cases in recent history,

having been cited by the courts and commentators

more than 20,000 times in its barely three-year

history. There have already been almost a dozen ap-

pellate decisions applying, interpreting or discussing

Twombly in an antitrust context.” And, there have

been many district court opinions misapplying the

Twombly standard across the country. App. 39a (cit-

ing cases). Courts have noted the widespread confu-

sion within the lower courts about how to properly

apply Twombly. Aktieselskabet, 525 F.3d at 15 (noting

that “[mJany courts have disagreed about the import

of Twombly”); In re Elevator Antitrust Litig., 502 F.3d

at 50. In fact, profoundly worrisome is the admission

the district court in this case made that “although the

Supreme Court says Rule & still exists, | think there

is a contradiction in the case... .” II] Jt-App. 778. The

clarity of pleading rules is not a backwater issue.

Congress has introduced two bills to clarify the post-

Twombly pleading rules. Notice Pleading Restoration

In addition to those cited above, see e.g. Tunica Web

Advertising v. Tunica Casino Operators Assoc., Inc., 496 F.3d

403, 409 (5th Cir. 2007); Cosmetic Gallery, Inc. v. Schoeneman

Corp., 495 F.3d 46, 54 (3rd Cir. 2007); Sheridan v. Marathon

Petroleum Co., 530 F.3d 590, 595 (7th Cir. 2008); Golden Bridge

Tech. Inc. v. Motorola Inc., 547 F.3d 266, 271 (5th Cir. 2008).

£o

Act of 2009, S. 1504, 111th Cong. (2009); Open Access

to Courts Act of 2009, IL.R. 4115, 111th Cong. (2009).

Significant risks attend a misunderstood conspir-

acy pleading standard. While Twombly has certainly

had its intended effect of limiting antitrust discovery

in meritless cases, its reach has been vastly extended

into the termination of perfectly plausible complaints,

like the one here. Concern about false positives in

cases brought by overly-litigious plaintiffs is one

thing, but the misapplication of a pleading rule that

thwarts Congressional intent is quite another. The

Sherman Act has been called “the Magna Carta of

free enterprise,” United States v. Topco Assoc., Inc.,

405 U.S. 596, 610 (1972), and its goals are no less

lofty than the protection and preservation of our na-

tional democracy, society and economy. Northern Pac.

Ry. Co. v. United States, 356 U.S. 1, 4 (1958). Yet, the

Sixth Circuit’s new rule effectively eliminates conspir-

acy cases brought on circumstantial evidence. It “pro-

poses to require either an express written agreement

among competitors or a transcribed oral agreement to

fix prices; [njothing less will do.” App. 42a. But if

plaintiffs are prohibited from relying on = circum-

stantial evidence to prove an agreement, “conspira-

cies would flourish; profit, rather than punishment,

would be the reward.” C-O-Two Fire Equip. Co. v.

United States, 197 F.2d 489, 194 (9th Cir. 1952), cert.

denied, 344 U.S. 892 (1952). Antitrust’s goals are

compromised each time a properly-pled conspiracy

complaint is prematurely dismissed, which has been

frequent enough without the Sixth Circuit's new

stringent requirements. App. 39a (“district court

judges across the country have dismissed a large

majority of Sherman Act claims on the pleadings

misinterpreting the standards from Twombly and

Iqbal... .”). Misapplication of the law is particularly

harmful if wielded by lower courts to circumvent the

will of Congress. App. 42a. In his dissent, Judge

Merritt best described the need for review when he

urged this Court “to make it clear that Twombly may

not be used, as my colleagues propose, as a cover for

repealing regulation of the marketplace through pri-

vate antitrust enforcement.” App. 42a.

In short, this case presents an ideal vehicle to

clarify the plausibility standard and more concretely

define its outer boundaries. The Court should grant

review and act decisively to reverse the Sixth

Circuit’s wayward interpretation of the plausibility

standard.

II. Review Is Independently Warranted To Re-

solve A Conflict Created By The Sixth

Circuit’s Decision With Decisions Of The

Fourth And Eighth Circuits And With

Decisions Of This Court Regarding The

Proper Pleading Of “Overt Acts” In The

Continuing Conspiracy Doctrine

The Sixth Circuit’s decision presents a second

issue independently worthy of review involving the

pleading of the continuing conspiracy doctrine in a

bankruptcy setting. In conflict with decisions from

Fourth and Eighth Circuits, the Sixth Circuit held

that the defendants did not commit overt acts, as a

matter of law, when they repeatedly purchased Travel

Agents’ services at prices set by the conspiracy (App.

lla), reasoning that each purchase was “merely the

reaffirmation of a previous act.” App. 10a.

The complaint alleges that after the Airlines’

conspiracy was implemented, major players involved

in its creation entered into bankruptcy.’ Compl.

q{ 109-116; App. 117a-118a. But, by continuing to

purchase services at the conspiracy price post-bank-

ruptcy, these airlines committed acts that arose post-

discharge and are liable for the resulting damages.

Specifically, the complaint alleges that “upon emerging

from bankruptcy” (Compl. 4 117; App. 118a), these

Airlines, “through their conduct,” “conformjed] to the

commission levels and caps to which their co-

conspirators had agreed” (Compl. 4 118; App. 118a),

resulting in a “continuing offense” to violate the

antitrust laws. Compl. { 109; App. 117a. In effect, the

conspiracy “straddled” the bankruptcy period, and by

continuing to purchase Travel Agent services at the

conspiracy rate, the Airlines committed overt acts

resulting in new post-discharge causes of action.

“In the context of a continuing conspiracy to

violate the antitrust laws ... each time a plaintiff is

injured by an act of the defendants a cause of action

accrues to him to recover the damages caused-by that

act.” Zenith Radio Corp. v. Hazeltine Research, Inc.,

' The complaint alleges that seven separate airlines filed

for bankruptcy. The only one relevant on this appeal is United.

401 U.S. 321, 338 (1971). In a continuing price-fixing

conspiracy, it is not the agreement itself or the

implementation of the conspiratorial price, but the

purchase of the product at the fixed rate that makes

up the last overt act establishing a new cause of

action. In Klehr v. A.O. Smith Corp., 521 U.S. 179

(1997), this Court explained:

Antitrust law provides that, in the case of a

“continuing violation,” say a price fixing

conspiracy that brings about a series of

unlawfully high priced sales over a period of

years, “each overt act that is part of the

violation and that injures the plaintiff,” e.g.,

each sale to the plaintiff, “starts the statutory

period running again... .”

Id. at 189 (quoting 2 AREEDA & HOVENKAMP, { 338b

p. 145 (rev. ed. 1995)) (emphasis added). “A conspiracy

thus continued is in effect renewed during each day of

its existence.” United States v. Borden Co., 308 U.S.

188, 202 (1939).

The Sixth Circuit recognized the validity of the

continuing conspiracy doctrine (App. 10a), and

acknowledged that a new cause of action arises with

the commission of each overt act. App. lla. However,

it held that when the Airlines’ continued to purchase

Travel Agents’ services at the conspiracy rate, they

did not commit overt acts. App. 10a-11a.

This holding conflicts with the Eleventh Circuit's

decision in Morton’s Market, Inc. v. Gustafson’s Dairy,

Inc., 198 F.3d 823 (11th Cir. 1999), a Section 1 price-

fixing conspiracy case with facts similar to those here.

Morton's Market involved a twenty-year conspiracy

beginning in the 1970s among the large dairy pro-

ducers in Florida to fix the prices of milk sold to

public schools. /d. at 826. 'The last meeting among the

defendants to set prices occurred in 1987. However,

sales of the milk at the fixed price continued until

1992. Plaintiffs filed their complaint in 1993. The

dairies moved for summary judgment on the ground

the action was time-barred by the four-year statute of

limitations, arguing the last overt act was the setting

of the fixed price in 1987. The Eleventh Circuit re-

jected Dairies’ argument and reversed the district

court's decision. Quoting the Klehr passage above, the

Court of Appeals correctly stated that the last overt

act was plaintiff’s purchase of the milk at the fixed

price:

[Wihen sellers conspire to fix the price of a

product, each time a customer purchases

that product at the artificially high price, an

antitrust violation occurs and a cause of

action accrues.

Id. at 828. “Even if there were no price-fixing con-

versations after 1987,” the Court explained, “if plain-

tiffs purchased milk at a fixed price after that date,

the purchase would constitute an overt act that in-

Jured it.” Id. (emphasis added).

The Fourth Circuit’s decision in Jn re: Cotton

Yarn Antitrust Litig., 505 F.3d 274 (4th Cir. 2007) also

conflicts with the holding below. There, the Fourth

Circuit upheld the sufficiency of an overt act allega-

tion in a complaint pleading a continuing conspiracy

in violation of Section 1, as here. The Court of

Appeals held that “luJnder Klehr,” the defendants

have committed an overt act “so long as the plaintiffs

made a purchase from the Defendants.” Jd. at 290-

291. Thus, the statute of limitations did not begin

running when the defendants decided to fix prices or

implemented the fixed price; rather, each transaction

at the fixed price constituted an overt act and a new

claim accrued. /d.

It makes no difference whether the overt act is

the sale of a price-fixed product or, as here, the

purchase of a price-fixed service. The law does not

distinguish between price-fixing conspiracies among

sellers or among buyers, Mandeville Island Farms v.

American Crystal Sugar Co., 334 U.S. 219, 253

(1948), because “price fixing by buyers raises the

same issues and poses the same dangers as price fix-

ing by sellers.” 12 AREEDA & HOVENKAMP, { 2010, p.

123 (3d ed. 2007). Neither does the law contemplate a

distinction between conspiracies to fix prices of

products or services. “|Tjhe law against buying and

selling cartels covers services as well as goods.” /d. at

125. Therefore, since the sale of a price-fixed product

constitutes an overt act, the purchase or acquisition

of a service constitutes an overt act.

The Airlines’ conspiracy to completely eliminate

the commission, as opposed to continuing to pay some

commission, may also have tainted the Sixth Circuit’s

analysis and distracted it from applying the law. But,

for purposes of pleading an overt act, the law cannot

distinguish between a commission cut to 0% or to

some positive rate, like 1%, under the mistaken

reasoning that the latter involves the payment of

some money (an act); whereas, the former does not. If

that were the law, and the Sixth Circuit’s rule is

susceptible to that reading, defendants would have

the perverse incentive to harm plaintiffs maximally

in order to escape liability completely. Moreover,

while the Sixth Circuit described the alleged overt act

as “United’s decision to maintain its 0% commission

policy,” that decision in fact required affirmative

action on United’s part, including the delivery of the

booked ticket, the acceptance of money in return for

the ticket, and the refusal to pay the Travel Agent

who booked the ticket.

Finally, the Sixth Circuit’s decision contains a

fundamental inconsistency. The Court of Appeals

distinguished AKlehr on the grounds that it “did not

involve a formerly bankrupt corporation.” App. 10a.

Therefore, the Airlines’ conduct could not “qualif[y] as

a continuing violation.” Jd. The Sixth Circuit thus

determined that the continuing violation doctrine

does not apply to a claim surviving through a

temporary bankruptcy period. On the other hand, the

Sixth Circuit also cited with approval the Ninth

Circuit’s decision in O’Loghlin v. County of Orange,

229 F.3d 871, 875 (9th Cir. 2000) for the proposition

that “a successfully reorganized debtor ... is liable

for any independent conduct that arises after the

confirmation of its bankruptcy plan.” App. 10a.

O’Loghlin specifically applied the continuing

violation doctrine to a violation that straddled the

bankruptcy period, as here. It held that a_ post-

bankruptcy violation is not discharged if it is a “con-

tinuation of the [defendant’s] illegal pre-discharge

behavior.” O’Loghlin, 229 F.3d at 873. In doing so, it

stated that “an important purpose of the continuing

violation doctrine is to prevent a defendant from

using its earlier illegal conduct to avoid liability for

later illegal conduct of the same sort.” Jd. The Ninth

Circuit concluded:

The district court’s holding would allow a

defendant to use pre-discharge violations .. .

to insulate itself from liability for post-

discharge violations, so long as the pre- and

post-discharge violations were part of the

same course of conduct.... The bankruptcy

laws provide no justification for such a re-

sult. Their purpose is to provide a “fresh

start” to a discharged debtor.... A “fresh

start” means only that; it does not mean a

continuing license to violate the law.

Id. If in distinguishing Klehr on the ground it did not

involve bankruptcy, the Sixth Circuit refused to apply

the continuing conspiracy doctrine to facts that

straddle a bankruptcy proceeding, it directly conflicts

with the Ninth Circuit’s decision in O’Loghlin. It, on

the other hand, it concedes the proper application of

the continuing conspiracy doctrine in this case, it

conflicts with the decisions defining an “overt act,” set

forth above.

CONCLUSION

The petition for a writ of certiorari should be

granted.

Respectfully submitted,

JOSEPH M. ALIOTO, JR.

Counsel of Record

JOSEPH M. ALIOTO, SR.

THOMAS PAUL PIER

ALIOTO LAW FIkM

555 California Street

Thirty-First Floor

San Francisco, California 94104

(415) 434-8900

March, :

10 Counsel for Petitioners

583 F.3d 896

UNITED STATES COURT OF APPEALS |

FOR THE SIXTH CIRCUIT

In re: TRAVEL AGENT COMMISSION

ANTITRUST LITIGATION.

No. 07-4464

TAM TRAVEL, INC., et al.,

Plaintiffs-Appellants,

DELTA AIRLINES, INC., et al.,

Defendants-Appellees.

Appeal from the United States District Court

for the Northern District of Ohio at Cleveland.

No. 03-30000 — Peter C. Economus, District Judge

Argued: October 24, 2008

Decided and Filed: October 2, 2009

Before: MERRITT, BOGGS, and

GRIFFIN, Circuit Judges.

COUNSEL

ARGUED: Joseph M. Alioto, Jr., Thomas Paul Pier,

ALIOTO LAW FIRM, San Francisco, California, for

Appellants. Peter K. Huston, LATHAM & WATKINS,

San Francisco, California, James A. Reeder, Jr.,

VINSON & ELKINS L.L.P., Houston, Texas, Lee H.

Simowitz, BAKER & HOSTETLER, Washington,

D.C., for Appellees. ON BRIEF: Joseph M. Alioto, Jr.,

Thomas Paul Pier, Joseph Alioto, Sr.,. ALIOTO LAW

FIRM, San Francisco, California, for Appellants. James

A. Reeder, Jr., Lauren J. Harrison, Elizabeth A.

Pannill, VINSON & ELKINS L.L.P., Houston, Texas,

for Appellees.

GRIFFIN, J., delivered the opinion of the court,

in which BOGGS, J., joined. MERRITT, J. (pp. 22-28),

delivered a separate dissenting opinion.

OPINION

GRIFFIN, Circuit Judge. Plaintiff travel agencies

appeal the district court’s dismissal of their Amended

Complaint for failure to state a claim under § 1 of the

Sherman Antitrust Act. Plaintiffs allege that defen-

dants conspired to reduce, cap, and eventually elimi-

nate the payment of base commissions in a concerted

effort to drive plaintiffs out of business in violation of

15 U.S.C. § 1. We affirm. In doing so, we hold that

plaintiffs’ claims against United Airlines were dis-

charged in bankruptcy and that plaintiffs’ claims

against the remaining defendants failed to allege

sufficient facts to plausibly suggest a prior illegal

agreement.

Plaintiffs are the owners of forty-nine travel

agencies engaged in the business of selling defendants’

airline services. When a plaintiff sold an airline

ticket before 2002, it received a sales commission

from the servicing airline that equaled a percentage

of the purchased ticket price. This practice, commonly

referred to as the payment of “base commissions,”

was industry-wide.

Plaintiffs allege a §1 conspiracy based on a

series of uniform base commission cuts adopted by

defendants over a seven-year period. According to

plaintiffs, each defendant’s decision to match its

competitors’ base commission cut was the product of

defendants’ prior illegal agreement to climinate the

practice of paying all base commissions — a result

achieved in March 2002.

Plaintiffs assert the conspiracy began in 1995,

when Delta, American, Northwest, United, and Con-

tinental each announced a $25 cap on base commis-

sions for one-way domestic tickets and a $50 cap for

' The following airlines were named as defendants in plain-

tiffs’ Amended Complaint: Air Canada, Alaska Airlines, Inc.

(“Alaska”), Alaska Air Group, Inc. (“AAG”), ATA Airlines, Inc.,

American Airlines, Inc., America West Airlines, Inc., Continental

Airlines Inc., Delta Air Lines, Inc., Hawaiian Airlines, Inc.,

Horizon Air Industries, Inc., Frontier Airlines, Inc., KLM Royal

Dutch Airlines, Northwest Airlines, Inc., United Airlines, Inc.,

US Airways, Inc., and U.S. Airways Group, Inc.

round-trip domestic tickets. Plaintiffs further contend

that United’s decision to cut its base commission rate

on September 18, 1997, from 10% of the purchased

ticket price to 8% is further evidence of the alleged

illegal agreement because American, Delta, North-

west, US Airways, Continental, and America West

each matched United’s commission cut on or before

September 29, 1997. On March 31, 1998, Frontier

Airlines announced that it, too, would reduce its base

commission rate from 10% to 8%, as did Alaska

Airlines on September 30, 1997.

Plaintiffs allege that defendants’ conspiracy

continued into mid-November 1998, when United im-

posed base commission caps of $50 and $100 for onc-

way and round-trip international airfare, respectively.

By December 2, 1998, American, Delta, Continental,

Northwest, and US Airways each adopted United’s

$50 and $100 base commission caps.

Almost one year later, on October 7, 1999, United

instituted its third commission cut, reducing its base

commission rate from 8% to 5% on all domestic and

international flights. American, Delta, Northwest,

Continental, and US Airways each adopted United’s

5% commission cut by the following week. America

West and Alaska each matched United’s 5% com-

mission cut on October 18, 1999, as did Frontier in

November 1999.

On August 17, 2001, American implemented base

commission caps of $10 for one-way tickets and $20

for round-trip tickets, effective the following day.

Within ten days, United, Delta, Northwest, Continen-

tal, US Airways, and America West each adopted

American’s $10 and $20 caps. Frontier and Alaska

followed suit on September 4, 2001, and November lL,

2001, respectively.

Finally, on March 14, 2002, Delta announced that

it would eliminate its practice of paying base com-

missions to travel agencies for both domestic and

international airfare, effective immediately. Within

ten days, American, United, Northwest, Continental,

US Airways, and America West likewise climinated

the payment of base commissions. Frontier and

Alaska followed suit in late May 2002.

Plaintiffs allege that each defendant’s decision to

cut, cap, and eventually eliminate its practice of

paying travel agencies a base commission would not

have occurred without collusion because such action,

if taken independently, was contrary to the individual

defendant’s economic self-interest. Plaintiffs point to

United’s unsuccessful attempt to cut base commission

rates in 1981 and American’s similar failed attempt

in 1983 as evidence of collusion in the present case.

In addition, plaintiffs’ Amended Complaint refers to

the deposition of a former American Airlines executive,

Michael Gunn, who testified that “industry consensus”

was necessary for industry-wide commission cuts to

hold. Gunn also testified that “he had to match

commission cuts exactly or he would undercut the

movement.” Plaintiffs assert that Gunn’s statements

are persuasive evidence of defendants’ common

motive to conspire.

As additional support for the alleged conspiracy,

plaintiffs point to several meetings where defendants

had an opportunity to conspire, including committee

meetings of the International Air Transport Associa-

tion in 1997 and 1998, as well as industry meetings

such as the “Conquistadores Del Cielo” (Conquerors

of the Sky), the Air Transport Association, the Japan

Air Summit, the British Air Summit, the Paris Air

Show, the Alex Brown Transportation Conference, the

International Aviation Symposium, and the Merril]

Lynch conference. Plaintiffs do not identify defendants’

attendees by name or title.

More specifically, the Amended Complaint asserts

that “in mid-1999 an Executive Vice-President of

Marketing & Distribution for Northwest Airlines, a

Senior Vice President of Planning for US Airways,

and a Senior Vice President of Marketing for Ameri-

can met for three hours in a Dallas hotel conference

room.” Plaintiffs further allege that “liJn 2001, a

Delta senior executive met for a weekend of golf and

socializing at the home of an American executive

responsible for setting American’s commission levels.”

By May 31, 2002, each defendant had eliminated

ils practice of paying travel agencies a base commis

sion. In addition, several defendants filed for and

have emerged from Chapter 11 bankruptcy, including

Delta, Northwest, and United.’

For the purposes of this appeal, only United’s bankruptcy

is relevant. United filed its Chapter 1] bankruptey petition on

(Continued on following page)

On April 9, 2003, plaintiff Tam Travel, Inc. and

forty-eight other travel agencies filed a complaint

against defendants for illegally agreeing to cap, cut,

and eliminate hase commissions in violation of § 1 of

the Sherman Antitrust Act. 15 U.S.C. § 1. On Sep

tember 13, 2007, plaintiffs had dismissed defendants

US Airways and US Airways Group from the suit

without prejudice. On September 14, 2007, the

district court determined that the Supreme Court’s

decision in Bell Atlantic Corp. v. Twombly, 550 U.S

544 (2007), could impact the present case and allowed

plaintiffs to file an Amended Complaint. On Septem-

ber 28, 2007, several defendants filed a joint motion

to dismiss the Amended Complaint under FED. R. CI\

P. 12(b\6).

On October 29, 2007, the district court granted

defendants’ motion to dismiss, ruling that: (1) plain-

tiffs failed to allege any conduct other than sporadic

parallel conduct regarding America West, Alaska,

Frontier, and Horizon; (2) plaintiffs failed to allege

any paralie! conduct as to KLM; (3) the emergence

of Northwest, United, and Delta from bankruptcy

discharged plaintiffs’ claims; (4) with regard to Con

tinental and United, plaintiffs failed to aver sufficient

December 9, 2002, and the bankruptcy court confirmed its

reorganization plan on January 20, 2006.

Plaint.ffs opted out of the putative class in Hall v. United

Air Lines, Inc., 296 F. Supp. 2d 652 (E.D.N.C. 2003)

Code defines a “debt” as “hability on a claim

Pursuant to 11 U.S.C. § 101(5), a “claim” includes a

“right to payment, whether or not such right is

reduced to judgment, liquidated, unliquidated fixed,

contingent, matured, jor] unmatured.”

The district court ruled that because United filed

for bankruptcy in December 2002 and its reorgani-

zation plan was not confirmed until January 2006,

United’s emergence from bankruptcy discharged any

liability on claims that arose before its reorgani-

zation. Because plaintiffs alleged that United made

its last commission cut in March 2002, the district

urt dismissed plaintiffs’ claims against Umited as

scharged debt under 11 U.S.C. § 101(5)

As a preliminary matter, plaintiffs’ brief does not

hallenge the district court’s decision to dismiss

United under 11 U.S.C. § 10115), other than to men-

le sentence that “lelach of these airlines

emerged from bankruptcy before Travel Agents filed

their complaint.” Moreover, the record and_ the

Amended Complaint refute this assertion. Because

plaintiffs present only a perfunctory argument re-

garding United’s dismissal under 11 U.S.C. § 101(5),

plaintiffs have waived this argument. See United

States v. Phinazee, 515 F.3d 511, 520 (6th Cir. 2008)

(issues adverted to in a perfunctory manner, unac-

companied by some effort at developed argumenta-

tion, are deemed waived). In any event, we find no

error in the district court’s ruling that United’s

potential liability qualified as discharged debt under

11 U.S.C. § 101(12).

10a

Plaintiffs assert that United is nonetheless liable

under a continuing violation theory because United

allegedly rejoined the conspiracy after emerging from

bankruptcy in 2006. Specifically, plaintiffs contend

that United’s decision to “continue” the “conspiracy

commission rate” (which, at this point, was 0%) after

its reorganization created a new § 1 claim under the

Sherman Act.

As a general rule, a successfully reorganized

debtor under Chapter 11 of the Bankruptcy Code

is liable for any independent conduct that arises

after the confirmation of its bankruptcy plan. /n r

WorldCom, Inc., 546 F.3d 211, 221 (2d Cir. 2008);

O’Loghlin v. County of Orange, 229 F.3d 871, 875 (9th

Cir. 2000). In short, the debtor gets a fresh start, but

that “does not [provide] a continuing license to violate

the law.” Jd. In the present case, the district court

concluded that United's post-reorganization 0° com-

mission policy did not create a new § 1 claim because

its decision was “merely a reaffirmation of a previous

act.”

Plaintiffs rely on Klehr v. A.O. Smith Corp., 521

U.S. 179 (1997), to argue that United’s conduct qual:

fies as a continuing violation. The Alehr case, however.

did not involve a formerly bankrupt corporation. /d

at 186. Klehr simply reiterates that the antitrust laws

recognize continuing violations and, more precisely,

that a new § 1 claim arises each time a company sells

a price-fixed product. Jd. at 188.

lla

We have held that an “antitrust cause of action

accrues ... each time a defendant commits an act

that injures the plaintiff’s business.” DXS, Inc. v.

Siemens Med. Sys., Inc., 100 F.3d 462, 467 (6th Cir.

1996) (citing Zenith Radio Corp. v. Hazeltine Research,

Inc., 401 U.S. 321, 338 (1971)). “[T]he focus is on the

timing of the causes of injury, i.e., the defendant's

overt acts, as opposed to the effects of the overt acts.”

Peck v. Gen. Motors Corp., 894 F.2d 844, 849 (6th Cir.

1990) (per curiam) (emphasis added). “|T|he fact that

|] injuries have a rippling effect into the future only

establishes that [plaintiffs] might have been entitled

to future damages... .” /d.

Here, we reject plaintiffs’ attempt to characterize

United’s decision to maintain its 0% commission policy

as an overt act. “Since the Supreme Court decided

Zenith, federal courts have uniformly defined a

continuing antitrust violation as one in which the

plaintiff’s interests are repeatedly invaded.” Peck,

894 F.2d at 849 (quoting Pace Indus., Inc. v. Three

Phoenix Co., 813 F.2d 234, 237 (9th Cir. 1987)

(internal quotation marks and alterations omitted)).

Although United’s participation in the alleged con-

spiracy would certainly create a rippling effect, plain-

tiffs assert that United's final act to effectuate that

conspiracy occurred in 2002, long before United

emerged from bankruptcy. We also cannot ignore the

consequence of concluding that an overt act occurred

under these facts. If we were to adopt plaintiffs’

continuing violation theory, the applicable limitations

period for a § 1 claim would be infinite — an antitrust

12a

plaintiff could routinely salvage an otherwise un-

timely claim by asserting that it continues to lose

revenue because of past alleged anticompetitive

conduct. We therefore hold that the district court

properly dismissed plaintiffs’ claims against United.

IT]

We review de novo the district court’s dismissal of

plaintiffs’ Amended Complaint under FED. R. Civ. P.

12(b\6). Johnson v. City of Detroit, 446 F.3d 614, 618

(6th Cir. 2006). In Twombly, the Supreme Court held

that a complaint alleging violations under § 1 of the

Sherman Act cannot survive a motion to dismiss un-

less it avers facts that raise a reasonable expectation

that discovery will reveal evidence of an_ illegal

agreement. Twombly, 550 U.S. at 556. In the wake of

Twombly, allegations of parallel conduct and bare

assertions of conspiracy no longer supply an adequate

foundation to support a plausible § 1 claim. /d.

Specifically, the complaint’s “|f Jactual allegations

must be enough to raise a right to relief above the

speculative level,” 1d. at 555, and “state a claim to

relief that is plausible on its face.” Id. at 570. Of

course, we must still “construe the complaint in the

light most favorable to the plaintiff, accept its allega

tions as true, and draw all reasonable inferences in

favor of the plaintiff.” Jones v. City of Cincinnati, 521

F.3d 555, 559 (6th Cir. 2008) (internal quotation and

citation omitted). “Yet, to survive a motion to dis-

miss, the complaint must contain either direct or

l3a

inferential allegations respecting all material elements

tu sustain a recovery under some viable legal theory.”

Eidson v. State of Tenn. Dep't of Children’s Servs., 510

F.3d 631, 634 (6th Cir. 2007). “We need not accept as

true legal conclusions or unwarranted factual infer-

ences,” Jones, 521 F.3d at 559 (alteration and internal

citation omitted), and “[clonclusory allegations or

legal conclusions masquerading as factual allegations

will not suffice.” Eidson, 510 F.3d at 634 (internal

citation omitted).

Allegations of concerted action by competitors are

frequently based on a pattern of uniform business

conduct, which courts often refer to as “conscious

parallelism.” Conscious parallelism, however, is not

in itself prohibited under § 1 of the Sherman Act. As

the Supreme Court explained in Twombly:

Because § 1 of the Sherman Act “does not

prohibit [all] unreasonable restraints of trade

... but only restraints effected by a contract,

combination, or conspiracy,” Copperweld

Corp. v. Independence Tube Corp., 467 U.S.

752, 775 (1984), “[t]he crucial question” is

whether the challenged anticompetitive con-

duct “stem|[s] from independent decision or

from an agreement, tacit or express,” Theatre

Enters. v. Paramount Film Dtstrib. Corp.,

346 U.S. [537, 540 (1954)|. While a showing

of parallel “business behavior is admissible

circumstantial evidence from which the fact

finder may infer agreement,” it falls short of

l4a

“conclusively establishling] agreement or .. .

itself constitut{ing] a Sherman Act offense.”

Id. at 540-41. Even “conscious parallelism,” a

common reaction of “firms in a concentrated

market [that] recogniz[e] their shared eco-

nomic interests agd their interdependence

with respect to price and output decisions” is

“not itself unlawful.” Brooke Group Ltd. v.

Brown & Williamson Tobacco Corp., 509 U.S.

209, 227 (1993).

The inadequacy of showing parallel conduct

or interdependence, without more, mirrors

the ambiguity of the behavior: consistent

with conspiracy, but just as much in line

with a wide swath of rational and competi-

tive business strategy unilaterally prompted

by common perceptions of the market. Ac-

cordingly, we have previously hedged against

false inferences from identical behavior at a

number of points in the trial sequence. An

antitrust-conspiracy plaintiff with evidence

showing nothing beyond parallel conduct is

not entitled to a directed verdict, see Theatre

Enters., supra; proof of a § 1 conspiracy must

include evidence tending to exclude the pos-

sibility of independent action, see Monsanto

Co. v. Spray-Rite Serv. Corp., 465 U.S. 752

(1984); and at the summary judgment stage

a § 1 plaintiff’s offer of conspiracy evidence

must tend to rule out the possibility that the

defendants were acting independently, see

Matsushita Elec. Indus. Co. v. Zenith Radio

Corp., 475 U.S. 574 (1986).

ld5a

Twombly, 550 U.S. at 554 (some internal citations

omitted).

The Twombly decision provides an additional

safeguard against the risk of “false inferences from

identical behavior” at an earlier stage of the trial

sequence — the pleading stage. A district court’s early

assessment of the sufficiency of a §1 claim under

Fep. R. Civ. P. 12(b)(6) or Fep. R. Civ. P. 12(c) ad-

dresses the dilemma of the extensive litigation costs

associated with prosecuting and defending antitrust

lawsuits. As the Twombly Court acknowledged, “the

costs of modern federal antitrust litigation and the

increasing caseload of the federal courts counsel

against sending the parties into discovery when there

is no reasonable likelihood that the plaintiffs can

construct a claim from the events related in the

complaint.” /d. at 558 (internal citation and quotation

marks omitted).

In Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009),

the Supreme Court explained the Twombly decision

as follows:

[In Twombly)|, we considered the sufficiency

of a complaint alleging that incumbent tele-

communications providers had entered an

agreement not to compete and to forestall

competitive entry, in violation of the Sher-

man Act, 15 U.S.C. § 1. Recognizing that § 1

enjoins only anticompetitive conduct “effected

by a contract, combination, or conspiracy,”

Copperweld Corp. v. Independence Tube Corp.,

467 U.S. 752, 775 (1984), the plaintiffs in

l6a

Twombly flatly pleaded that the defendants

“hald] entered into a contract, combination

or conspiracy to prevent competitive entry

_ and hald] agreed not to compete with one

another.” 550 U.S. at 551 (internal quotation

marks omitted). The complaint also alleged

that the defendants’ “parallel course of con-

duct ... to prevent competition” and inflate

prices was indicative of the unlawful

agreement alleged. Jbid. (internal quotation

marks omitted).

The Court held the plaintiffs’ complaint

deficient under Rule 8. In doing so |,] it first

noted that the plaintiffs’ assertion of an un-

lawful agreement was a “‘legal conclusion’”

and, as such, was not entitled to the assump-

tion of truth. /d., at 555. Had the Court

simply credited the allegation of a conspir-

acy, the plaintiffs would have stated a claim

for relief and heen entitled to proceed

perforce. The Court next addressed the “nub”

of the plaintiffs’ complaint — the well-

pleaded, nonconclusory factual allegation of

parallel behavior — to determine whether it

gave rise to a “plausible suggestion of con-

spiracy.” /d., at 565-566. Acknowledging that

parallel conduct was consistent with an

unlawful agreement, the Court nevertheless

concluded that it did not plausibly suggest an

wlicit accord because it was not only compati-

ble with, but indeed was more likely explained

by, lawful, unchoreographed free-market be-

havior. Id. at 567. Because the well-pleaded

fact of parallel conduct, accepted as true, did

not plausibly suggest an unlawful agreement,

Lva

the Court held the plaintiffs’ complaint must

be dismissed. /d.. at 570

Id. (emphasis added

Plaintiffs first argue that Twombly is distin

guishable because their Amended Complaint “makes

independent allegations of actual agreement.” Plain-

tiffs contend that {4 90, 91, and 121 independently

allege an illegal agreement. In 4 121, plaintiffs use

the word “agreement,” asserting that “the conduct of

Defendants described hereinabove, and... the agree

ment between and among Defendants to reduce, cap

and eliminate commissions paid to plaintiffs” violates

the Sherman Act. (Emphasis added.) This averment

is nothing more than a legal conclusion “masquer

ading” as a factual allegation. See Eidson, 510 F.3d at

634. The Supreme Court rejected a similar argument

in Twombly, holding that “a few stray statements

speakling] directly of agreement ... are merely legal

conclusions resting on | | prior allegations.” Twombly,

550 U.S. at 564.

2aragraphs 90 and 91 of the Amended Complaint

assert that defendants’ executives, who were “respon-

sible for [] setting [] commission levels ... met

frequently during the period of cuts and caps,” which

“afforded these persons the opportunity to ... con-

spire” and “communicate| |] with one another for the

purpose of ... implementing ... their common

plan....” These allegations, however, aver only an

18a

opportunity to conspire, which does not necessarily

support an inference of illegal agreement. In fact,

{4 90 and 91 are located in a section of the Amended

Complaint entitled “Opportunities for Defendants to

Combine and Conspire.” We conclude that plaintiffs’

attempt to distinguish Jiwombly on the basis that

plaintiffs allege “actual agreement” fails.

Next, plaintiffs argue that the district court erred

when it dismissed their §1 claim against Alaska,

AAG, Horizon, and America West because the

Amended Complaint contained more than bare asser

tions of conspiracy and parallel conduct. We disagree

In each of the four references to Alaska in the

Amended Complaint, plaintiffs allege only that Alas-

ka adopted uniform commission cuts in 1997, 1999,

2000, and 2001. The Amended Complaint does not

contain any factual allegations to support Alaska’s

involvement in the conspiracy, beyond its parallel

behavior. America West is also referred to four times

but, like Alaska, plaintiffs allege parallel conduct

alone and fail to aver facts sufficient to implicate

America West in any conspiracy.

AAG and Horizon are also named defendants and

parties to this appeal, but neither is mentioned in the

body of the Amended Complaint, nor do plaintiffs

specify how these defendants are involved in the

alleged conspiracy. Consequently, if these “defen-

dant[s] [sought] to respond to plaintiffs’ |] allegations

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evidence sufficient to suggest an antitrust con: piracy

similar to that present in Interstate Circuit v. United

States, 306 U.S. 208 (1939). In this regard, plaintiff

Amended Complaint alleges that

Fach Defendant knew that concerted action

to reduce and cap commissions was contem

plated and invited. Each Defendant adhered

to the common scheme to reduce and cap

commissions and participated in it. Each

Defendant was advised that every other De

fendant was invited to participate. Each De

fendant knew that cooperation was essential

to successful operation of the plan

In Interstate Circuit, the Supreme Court held

that a pattern of umform admission ticket prices at

subsequent-run theaters was sufficient to permit a

fact-finder to infer the existence of an illegal! agres

ment. Plaintiffs focus on the following language of

Interstate Circuttl

Kach was aware that all were inactive

competition and that without substantially

We recognize that Interstate Circuit was decided at a more

advanced stave of the legal process, and we do not suppest that

the same standards ought to be applied on a motion to dism:

even under Twombly. However, plaintiffs argue that they have

alleged enough factual matter “to raise a reasonable expectation

that discovery will reveal” circumstantial “evidence of itlegal

ayreement,” Tworbly, 550 U.S. at 556, analogous to the circum

stantial evidence discovered in Interstate Circuit. Thus, we ex

amine plaintiffs’ complaint with an eye to any factual allegations

that would make it “reasonable” to “expect []” that similar

circumstantial evidence would surface during discovery. Jd

2la

unanimous action with respect to the re-

strictions for any given territory there was

risk of a substantial loss of the business and

good will of the subsequent-run and inde-

pendent exhibitors, but that with it there

was the prospect of increased profits.

306 U.S. at 222.

However, plaintiffs fail to acknowledge the sa-

lient evidence of unlawful collusion presented in

Interstate Circuit. Specifically, in Interstate Circuit, a

Texas movie theater chain sent an identical letter to

eight major movie distributors threatening to dis-

continue showing their films if the distributors did

not require all subsequent-run theaters to charge a

minimum admission price of twenty-five cents. Jd. at

216-17. The admission price customarily charged in

independently operated subsequent-run theaters in

Texas at that time was less than twenty-five cents.

Id. at 217. Soon thereafter, each distributor required

all subsequent-run theaters showing their films to

charge a minimum of twenty-five cents.

The Supreme Court concluded that Interstate

Circuit's letter, which listed all eight distributors as

addressees, provided uncontested evidence that each

distributor knew about the involvement of the others

and constituted persuasive evidence of a conspiracy,

particularly because the defendants could offer no

alternative reason for their parallel pricing demands.

Id.

Plaintiffs point to the Airline Reporting Corpo-

ration (“ARC”), which is an information clearinghouse

for airlines. The ARC provides information on ticket

distribution, reporting and settlement services, and

base commission rates paid to travel agents. How-

ever, there is no allegation in the Amended Complaint

that ARC could provide defendants with commission

reduction information before defendants implemented

their rate reductions. According to the Amended

Complaint, every leader airline (the first to announce

and implement a commission cut) publicly announced

its cut and implemented the change almost immedi-

ately. Thus, defendants’ access to ARC does not sug-

gest a viable means to collude on commission rates

before such reductions occurred.

In Monsanto Co. v. Spray-Rite Service Corp., 465

U.S. 752, 768 (1984) (emphasis added), the Supreme

Court established the modern standard to evaluate

evidence bearing on concerted action:

The correct standard is that there must be

evidence that tends to exclude the possibility

of independent action. ... That is, there must

be direct or circumstantial evidence that rea-

sonably tends to prove that the [defendant]

and others had a conscious commitment to a

common scheme designed to achieve an

unlawful objective.

We applied this standard in Re/Max Int’, Inc. v.

Realty One, Inc., 173 F.3d 995 (6th Cir. 1999),

wherein the plaintiff, a national real estate brokerage

franchiser, sued two local real estate firms, alleging a

23a

violation of § 1 of the Sherman Act. Under the local

firms’ adverse-splits policy, whenever Re/Max agents

were involved in a transaction, defendants paid them

only 25 or 30 percent of the commission, rather than

the industry norm of a 50/50 split. Re/Max alleged

that the adverse-splits policy, the means by which

defendants controlled the market for hiring real

estate agents, violated § 1. 173 F.3d at 1010. Re/Max

claimed that the adverse-splits policy lowered its

sales revenue and prevented it from recruiting know]-

edgeable and experienced sales agents because both

defendants adopted a policy that paid its agents less

than the industry norm. /d.

We reversed the district court’s grant of summary

judgment in favor of the defendants, holding that the

plaintiff provided sufficient circumstantial evidence

tending to exclude the possibility of independent

conduct. Jd. at 1025. We concluded the following “plus

factors” were important when evaluating circum-

stani:al evidence of concerted action:

(1) whether the defendants’ actions, if taken

independently, would be contrary to their

We note that Re/Max Intl, Inc. was an appeal from a

erant of summary judgment. Here, our review is constrained by

Fed. R. Civ. P. 12(b)\(6). Nonetheless, plaintiffs argue they have

put forth factual allegations that would make it reasonable to

expect that discovery will reveal evidence of the Re/Max “plus

factors.” This analysis is instructive insofar as it illuminates the

plausibility of defendants’ lawful, unchoreographed free-market

behavior.

24a

economic self-interest; (2) whether defen

dants have been uniform in their actions;

(3) whether defendants have exchanged or

have had the opportunity to exchange infor-

mation relative to the alleged conspiracy;

and (4) whether defendants have a common

motive to conspire. Ordinarily, an affirmative

answer to the first of these factors will

consistently tend to exclude the likelihood of

independent conduct.

Id. at 1009 (internal citation omitted).

Key to our decision in Re/Max was evidence that

use of the adverse-splits policy would not be in either

defendant’s independent economic interest. If only one

defendant adopted the policy, Re/Max agents would

simply deal with the other defendant, and thus sales

and revenue would shift away from one defendant to

the other. Jd. at 1010-11. Moreover, even if one defen-

dant adopted the “adverse splits policy on its own (a

‘highly unlikely’ event in the first place),” the other

local real estate firm had a strong incentive not to do

likewise. Jd. Thus, we concluded that the local firms’

decision to adapt the adverse-splits policy, despite

a natural inclination not to do so, was persuasive

evidence of prior agreement. /d.

Citing Re/Max, plaintiffs assert that no rational

airline would attempt to cut commission rates without

entering into a prior agreement because the leader

airline would lose revenue to its competitors. In

support of this position, plaintiffs point to American's

unsuccessful attempt to cut base commission rates

from 10% to 7% in 1983 and United’s similar attempt

to reduce base commission rates in 1981. Plaintiffs

assert that both airlines quickly retracted their base

commission cuts because the travel agencies retaliated

by booking their customers on airlines that main-

tained the staius quo commission rate. Plaintiffs

contend that when one of defendants’ competitors

announced a base commission cut, each defendant

had a strong incentive not to adopt that cut because

its natural economic inclination would be to absorb

any revenue shifted away from its competitor.

First, Michael Gunn, former Executive Vice

President of Marketing and Planning at American,

testified that an independent reduction in commis-

sion rates would advance each defendant’s economic

self-interest. Each defendant could have calculated

reasonably that a successful commission cut would

yield greater net revenue than the likely net loss due

to business diverted by plaintiffs to their competitors.

This decision is especially plausible in a marketplace

that has changed fundamentally since 1983 due to

technological advances in airline ticket purchasing.

Defendants contend that new, alternate methods for

airfare purchase — including direct purchases by

customers on the internet — provided a_ greater

economic incentive to cut commission rates on a trial-

and-error basis. Defendants also assert that it was

simple and inexpensive for a leader airline to inno-

vate and then wait and see, with the hope and

expectation that its competitors would institute

similar cuts. If the industry did not follow, the leader

26a

airline could simply retract the cut. Thus, defendants

have offered a reasonable, alternative explanation for

their parallel pricing behavior. In addition, if we

follow plaintiffs’ argument to its logical end, it is

difficult to imagine a scenario where a commission

cut could ever occur without collusion. Based on these

facts, we conclude that each defendant had a reasona-

ble, independent economic interest in adopting a

competitor’s commission cut rather than to maintain

the status quo.

We therefore hold that plaintiffs have failed to

allege sufficient facts plausibly suggesting (not merely

consistent with) an agreement in violation of § 1 of

the Sherman Act because defendants’ conduct “was

not only compatible with, but indeed was more likely

explained by, lawful, unchoreographed free-market

behavior.” Ashcroft v. Iqbal, 129 S.Ct. at 1950.

" We note that plaintiffs opted-out of a class action that

alleged an identical § 1 claim against these defendants. [a// v.

United Air Lines, Inc., 296 F. Supp. 2d 652 (E.D.N.C. 2003),

aff'd sub nom. Hall v. Am. Airlines, Inc., 118 F. App’x 680 (4th

Cir. 2004). In Hall, the district court granted summary judg-

ment in favor of defendants, finding “overwhelmingly compelling

evidence that the commission cuts and caps ... were just as

likely the result of competitive conduct and natural changes in

the market as of the illegal conspiracy alleged by plaintiffs.” Jd.

at 671. Although a district court decision affirmed by the Fourth

Circuit is not authoritative in the Sixth Circuit, we think that

the result in Hall is something we should at least consider

(when analyzing plausibility), “both for its persuasive power,

and because it involves the same facts.” Premier Elec. Constr.

Co. v. Nat Elec. Contractors Ass'n, Inc., 814 F.2d 358, 367 (7th

Cir. 1987) (citation omitted) (considering Fourth Circuit decision

(Continued on following page)

2ia

Pursuant to Twombly, district courts must assess the

plausibility of an alleged illegal agreement before

parties are forced to engage in protracted litigation

and bear excessive discovery costs. Twombly, 550 U.S.

at 558-59. In this regard, we note that the plausibility

of plaintiffs’ conspiracy claim is inversely correlated

to the magnitude of defendants’ economic self-interest

in making the cuts.” See Matsushita, 475 U.S. at 57

(defining ambiguous evidence as that which is as con-

sistent with permissible competition as with illegal

conspiracy). We are not persuaded by plaintiffs’ argu-

ment that defendants would not seek to reduce base

commissions independently, especially during the late

1990s and into 2002, where changes in the market-

place provided consumers with alternate ticket-

purchasing options. As the Court stated in Twombly,

“there is no reason to infer that [these defendants]

had agreed among themselves to do what was only

natural anyway.” 550 U.S. at 566.

Next, plaintiffs rely upon { 87 of their Amended

Complaint, which includes an excerpt from the

in antitrust action involving defendants whose activities spanned

more than one court of appeals). We also acknowledge the

Seventh Circuit’s statement in Premier, which warned, “[o]nly

the gravest reasons should lead [a] court in [an] opt-out suit to

come to a conclusion that departs from that in the class suit.” /d.

at 367-68.

* Defendants assert that “each percentage point reduction

in travel agent commissions was worth approximately $56

million, and that by 2002, the combined value of the commission

cuts was more than a billion dollars.”

28a

deposition of Michael Gunn. Gunn testified that “in-

dustry consensus” on new commission levels was

necessary for the commission cuts and caps to hold.

Gunn also testified that “he had to match commission

cuts exactly or he would undercut the movement.”

Plaintiffs argue that Gunn’s testimony provides strong

evidence of an antecedent agreement. We disagree.

The district court reviewed Gunn’s deposition

testimony in its entirety and carefully considered all

of the factual allegations which, taken as true, could

plausibly imply that defendants entered into a

preceding agreement. After doing so, the district court

ruled that there were insufficient facts to raise a

reasonable expectation that discovery would reveal

evidence of an illegal agreement. In reaching its

conclusion, the district court noted the importance of

the following portion of Gunn’s testimony:

Q. [Mr. Alioto (counsel for plaintiff)}: It

was, in fact, represented to you by another

person at American that in order for these

reductions of commissions to work that you

had to get common agreement of the indus-

try; that was the most important thing?

A. [Mr.Gunn]: I would respond again that

my belief is you have to be matched if the cut

is to be [successful]. But I don’t know I don’t

care if there’s a common agreement or other.

All I care about is how people behave if I do

something or how I believe if they do some-

thing. To me that’s not consensus. That’s

taking a common action after the fact which

is to me a lot different than consensus.

29a

Consensus speaks to prior agreement. There

certainly wasn’t any prior agreement in

these cases.

Based on the facts alleged by plaintiffs, it is just

as likely that American’s 2001 commission cap was an

effort to reduce its internal commission costs, with

the ancillary hope that its competitors would follow

its lead. As stated by a respected antitrust authority:

When one oligopolist raises its price, each of

its rivals must decide whether to follow.

Continuing the previous price would allow

each of the others to increase its sales if the

leader persists in charging a higher price.

But each knows that the leader is likely to

retract an increase that is not followed.

Accordingly, each rival asks itself whether it

is better off at the lower price when it is

charged by all or at the higher price when

charged by all. If the latter, as will often be

the case, the leader’s price increase is likely

to be followed.

* a *

The price leader may assume that others

have made a similar calculation about which

price will maximize profits. Or the leader

may simply proceed by trial and error: raise

the price and see what happens, especially

where reversing an unfollowed price rise is

not very costly.

6 PuHiILtutie E. AREEDA & HERBERT HOVENKAM”, ANTI-

TRUST LAW ¥ 1410b (2d ed.2003).

30a

In addition, the matching of American’s 2001

commission cap by the other defendants is not

necessarily indicative of prior agreement. On this

issue, the Seventh Circuit has observed that:

[aj firm in a concentrated industry typically

has reason to decide (individually) to copy an

industry leader. After all, a higher-than-

leader’s price might lead a customer to buy

elsewhere, while a lower-than-leader’s price

might simply lead competitors to match the

lower price, reducing profits for all. One does

not need an agreement to bring about this

kind of follow-the-leader effect in a con-

centrated industry.

Reserve Supply Corp. v. Owens-Corning Fiberglas

Corp., 971 F.2d 37, 53 (7th Cir. 1992). Thus, each

defendant’s decision to match a new commission cut

was arguably a reasoned, prudent business decision.

Moreover, if each defendant asked “itself” whether it

was “better off” paying base commissions (paid by

all) or not paying base commissions (eliminated by

all), each defendant would plausibly elect the latter

(from a purely economic standpoint).

Plaintiffs also argue that their factual allegations

regarding defendants’ opportunities to conspire are

enough to nudge their § 1 claim across the line from

conceivable to plausible. Twombly, 550 U.S. at 570.

Specifically, plaintiffs rely upon { 100, which alleges

that “an Executive Vice-President of Marketing &

Distribution for Northwest Airlines, a Senior Vice

President of Planning for US Air, and a Senior Vice

3la

President of Marketing for American met for three

hours in a Dallas hotel conference roum”; and upon

47 102 as well, which avers that “in 2001, a Delta

senior executive met for a weekend of golf and

socializing at the home of an American executive

responsible for setting American’s commission levels.

Four months later, American led an industry-wide

reduction on commission caps from $20 to $10. .. .”

However, plaintiffs’ Amended Complaint does not

cite any specific meetings that involved both Con-

tinental and American, the only two remaining

defendants. The fact that American and Continental

gathered at industry trade association meetings dur-

ing the seven-year period when defendants reduced

commission rates should not weigh heavily in favor of

suspecting collusion. The Supreme Court rejected a

similar argument in Twombly:

From the allegation that [defendants] belong

to various trade associations, ... the dissent

playfully suggests that they conspired to

restrain trade, an inference said to be but-

tressed by the common sense of Adam Smith.

If Adam Smith is peering down today, he

may be surprised to learn that his tongue-in-

cheek remark would be authority to force his

famous pinmaker to devote financial and

human capital to hire lawyers, prepare for

depositions, and otherwise fend off allega-

tions of conspiracy; all this just because he

belonged to the same trade guild as one of

his competitors when their pins carried the

same price tag.

32a

Twombly, 550 U.S. at 567 n.12 (internal citation

omitted). Moreover, a mere opportunity to conspire

does not, standing alone, plausibly suggest an illegal

agreement because American’s and Continental’s

presence at such trade meetings is more likely ex-

plained by their lawful, free-market behavior. [qgbal,

129 S. Ct. at 1950.

Finally, plaintiffs argue that we should rely upon

a statement made in 1983 by a former American

Airlines executive who “approved commission cuts

that are the subject of this action.” Plaintiffs allege

that this unnamed American executive encouraged an

execulive of a competitor airline (also unnamed) to

increase its fares by 20% to “make more money.”

Plaintiffs presumably refer to a statement made

by Robert Crandall, former President of American, to

Howard Putnam, former President of the now-defunct

Braniff airlines. See United States v. Am. Airlines,

743 F.2d 1114, 1116 (5th Cir. 1984). First, we note

that Crandall made this statement more than twenty-

five years ago. Second, the Amended Complaint avers

only that Crandall “approved commission cuts” and

fails to allege that he was actually involved in the

conspiracy at issue here. In addition, we note that

Crandall retired from American in 1998, placing his

departure as CEO at the very beginning of plaintiffs’

conspiratorial time line.

We conclude that Crandall’s prior statement is

too remote in time to support a plausible inference of

agreement. We also do not view his statement as

tending to raise a reasonable expectation that dis-

covery will reveal evidence of an illegal agreement

between Continental and American. See Twombly,

950 U.S. at 555-56.

For these reasons, we affirm the judgment of the

district court

DISSENT

MERRITT, Circuit Judge, dissenting. In the re

cent Twombly and Iqbal cases, quoted and discussed

at length by my colleagues in their majority opinion,

the Supreme Court has started to modify sumewhat,

but not drastically, the notice pleading rules that

have reigned under Conley v. Gibson, 355 U.S. 41, 45

(1957) (“a complaint should not be dismissed for

failure to state a claim unless it appears beyond

doubt that the plaintiff can prove no set of facts in

support of his claim which would entitle him to

relief”). These two cases now require more than sim-

ple notice and conclusory statements of ultimate facts

about the case. Instead plaintiffs must plead “suffi-

cient factual matter” to state a legal claim or cause of

action that is not only “conceivable” but also “plaus:

ble,” independently of the notice given and the legal

conclusions stated — in short, a set of “well-pleaded

34a

factual allegations” that make the cause of action

“plausible.” Iqbal, 129 S. Ct. at 1949-51 (2009). The

Supreme Court majority has made clear that 1t is not

making a major change in the law of pleading with

Twombly and its progeny.’

As with any other new, general legal standard,

the nature and meaning of the newly modified

standard can be understood and followed only by

analyzing how the standard is applied in actual cases

like this case. Here my colleagues have seriously

misapplied the new standard by requiring not simple

“plausibility,” but by requiring the plaintiff to present

at the pleading stave a strong probability of winning

the case and excluding any possibility that the de

fendants acted independently and not in unison. My

colleagues are requiring the plaintiff to offer detailed

facts that if true would create a clear and convincing

case of antitrust liability at trial without allowing the

plaintiff the normal right to conduct discovery and

have the jury draw reasonable inferences of liability

from strong direct and circumstantial evidence.

The Court has been careful to point out that Tivombly

should not be read to impose a “probability requirement,” or a

“‘heightened’ pleading standard.” Twombly, 550 U.S. at 556, 595

n. 14. The Court commented that an otherwise “well-pleaded

complaint may proceed even if it strikes a savvy judge that ac

tual proof of those facts is improbable, and that recovery is very

remote and unlikely.” Jd. at 556 Gnternal quotations omitted)

35a

Rs.

Twombly itself was a telephone antitrust case in

which the only non-conclusory factual allegations in

ithe complaint of a “contract, combination or con-

spiracy in restraint of trade” was that the former

Baby Bell telephone companies continued to do

business in their former home territories and did not

“attack” and try to take market share away from the

other operating Baby Bell companies in their home

region. This was the full extent of the Theombly

factual allegations of anti-competitive behavior. There

was no allegation of action, as opposed to nonaction,

misfeasance as opposed to nonfeasance. The Supreme

Court sensibly pointed out that there could be meny

explanations for this similar economic nonaction

other than the kind of agreement not to compete

required for liability under § 1 of the Sherman Act.

Thus the Supreme Court held that this one specific

factual allegation of similar conduct was insufficient

alone to state a “plausible” claim, though the Court

seems to say that this kind of factual statement alone

makes the pleading issue “close.” Tieambly, 550 U.S.

at 5457 (“allegation of parallel conduct ... gets the

complaint close to stating a claim”).

If the Tivombly pleading issue was “close,” but

insufficient, based only on similar, stand-pat non-

feasance toward each other’s historical territory, the

allegations concerning the in unison, affirmative

behavior of the airlines in this case are obviously

sufficient. The factual allegations in this case create

36a

an overwhelming case for the plaintiff to get by a

motion to dismiss on the pleading.

Five times the airlines acted affirmatively, ag-

gressively and publicly in unison to cut, fix and hold

the price the airlines would pay the travel agents.

Although at present there is no written contract to

that effect, the facts alleged present so plain a *-se

that they might as well have put the plan in writing.

1. The complaint alleges that United and Amer-

ican tried in 1981 and 1983, respectively, to fix the

price lower to the travel agents but the other airlines

would not go along. The allegations recite the state-

ments of an American Airlines executive that the

airlines learned not to try again until everyone was

on board. The complaint alleges inside information

tantamount to a partial confession.

2. Then when they tried again in 1995 the plan

went like clock-work. Everyone followed the leader

five straight times until the price reached zero. The

allegations of fact, based on testimony of insiders,

was that the plan could not work without agreement

but could work if the airlines acted in unison. Since

the plan worked like a charm, the allegations raise a

strong inference of agreement. Not as strong as

allegations raising an inference that “the sun will rise

in the morning” based on history, but strong enough

to be more than “plausible.”

3. The airline executives in charge must not

only have had hundreds of telephone conversations

with each other and through intermediaries, but the

01a

specific, time-and-place factual allegations are that

they met frequently over the period the airlines were

acting in unison and according to plan. To suggest

that they did not ever in all the meetings and per-

sonal contacts discuss their union of interests and

how the cuts were working defies belief. The father of

laissez faire economic theory, the liberal Scottish

moral philosopher, Adam Smith, made the same basic

point even more forcefully in The Wealth of Nations

(1776), 230 years ago: “People of the same trade

seldom meet together, even for merriment and

diversion, but the conversation ends in a conspiracy

against the public.” Book 1, Chap. 10, part 1, 148

(New York: Modern Library, 2000). If the factual

allegations of meetings are true — a matter not yet

determined by an impartial fact finder — the case of

liability is certainly strong enough to go to the jury.

4. The airlines, and_ specifically American

Airlines’ CEO Robert Crandall, attempted this type of

coordinated scheme in the past. In 1984, Crandall

was implicated in a price-fixing conspiracy because of

comments he made to a competing airline president.

In a recorded telephone conversation, the president of

the competing airline asked Crandall how both air-

lines could continue to enjoy a monopoly over service

to Dallas-Fort Worth International Airport, and

Crandall instructed his competitor to raise its price

and American would follow suit the very next day

with a price increase of its own. U.S. v. American

Airlines, Inc., 743 F.2d 1114, 1116 (5th Cir. 1984).

Having proposed to fall in line behind one another

38a

before strongly suggests that the airlines would do it

again. In fact, when Delta announced a cap on travel

agent commission in 19$5, Crandall was responsible

for setting American Airline’s travel agent commis-

sions. Appellants’ Reply Brief at 18. Unsurprisingly,

American followed Delta’s lead the very next day. Jd.

To summarize, the complaint alleges that price

cuts could not be made absent unilateral, follow-the-

leader action by all of the defendants. It provides

specific times and locations of numerous meetings

attended by the defendants. Finally, and most impor-

tantly, the complaint ties the dates of those meetings

with industry-wide simultaneous rate cuts that fol-

lowed immediately thereafter. Reading these allega-

tions as a whole, the complaint clearly satisfies the

Twombly standard. In fact, the Supreme Court in

Twombly noted that multiple competitors making

“complex and historically unprecedented changes in

pricing structure ... for no other discernible reason”

would properly state a claim under $1 of the Sher-

man Act. 550 U.S. at 557 n.4. That appears to be

exactly the situation here.

[l.

The antitrust cases decided in both courts of

appeals and district courts since Theombly and Iqbal

are few, and most of the cases decided by district

courts have yet to reach the courts of appeals. But see

St. Clair v. Citizens Fin. Group, No. 08-4870, 2009

WL 2186515 (3rd Cir. Jul. 23, 2009). That said,

39a

district court judges across the country have dis-

missed a large majority of Sherman Act claims on

the pleadings misinterpreting the standards from

Twombly and Iqbal, thereby slowly eviscerating anti-

trust enforcement under the Sherman Act. See, e.g..

In re flawauan & Guamanian Cabotage Antitrust

Litig., No. 08-md-1972 TSZ, 2009 WL 2581510 (W.D.

Wash. Aug. 18, 2009); Barley Lumber & Supply Co. v.

Ga.-Pac. Corp., No. 1:08CV1394LG-JMR, 2009 WL

2872307 (S.D. Miss. Aug. 10, 2009); Burtch v. Milberg

Factors, Inc., No. 07-556-JJF-LPS, 2009 WL 1529861

(D. Del. May 31, 2009).

The uniformity needed for the rule of law and

equal justice to prevail is lacking. This irregularity

may be attributed to the desire of some courts, like

my colleagues here, to use the pleading rules to keep

the market unregulated, while others refuse to use

the pleading rules as a cover for knocking out anti-

trust claims. Compare In re California Title Ins.

Antitrust Litig., 2009 WL 1458025 (N.D. Cal. May 21,

2009) (dismissing price-fixing complaint against

major title insurance agencies who jointly set rates in

states where they belonged to statutorily authorized

rate setting organizations and employed similar rates

in other states) with Standard Iron Works v. Ar-

celormittal, No. 08-C-5214, 2009 WL 1657449 (N.D.

Ill. 2009) (finding plausibility despite lack of direct

evidence of collective action by looking at a series of

industry meetings attended by steel executives that

were followed by industry-wide production cuts).

40a

Iil.

The Sherman Act was enacted in 1890 at the

height and in the heat of controversy during a former

Gilded Age. It was enacted to deter price fixing,

market allocation among producers, and monopoli-

zation at a time of extreme disparities in economic

power and wealth brought on by an extreme version

of laissez faire economic theory.” After a long, slow

climb toward a more equal distribution of economic

power over the past century, in part because of the

enforcement of the Sherman Act, we have recently

returned to the great disparities that formerly

existed. The failure to regulate the marketplace

through antitrust enforcement is probably related to

the mind-set that has dramatically reversed the

earlier trend toward equality.

* See 21 Cong. Rec. 2460 (1889) (This inequality “has grown

within a single generation out of the concentration of capital

into vast combinations to control production and trade and to

break down competition.”).

* A picture of the recent reversal of the long trend toward

equality is as follows:

(Continued on following page)

4la

50% -

: i

foi: I

aru

zi i of |: P

45% - : . |

2 i fs

7 ; 4 {

- > ee

_ wrt

8 am

£ f+. fa

i |

5 35% - ee

= aa

$ i4

- Po: |

30% in oe —-~{-4—|

-+ Exclucing capital gans i off Be ty

ae aoe ae

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26% ---—' sae : ba wha

~ | ~ a] ~ ™N ~ ts] ~ ™ ~ “ ~ ~~ ~ Se t ~~ ~

ea) an ao eo on n a a oo mom on oO n a nan Q

FIGURE 1

The Top Decile Income Share, 1917-2007

Source: Table Al and Table A3, col. P90-100.

Income is defined as market income (and excludes

government transfers). Top decile includes all families

with annual income above $109,630 in 2007.

Forty years ago the average CEO made twenty times what the

average worker did; now it is nearly 400 times. Thomas Piketty

& Emmanuel Saez, Income Inequality in the United States:

1913-1998, 118 Q.J. Econ. 1 (2003), data updated through 2007

available at http://elsa.berkeley.edu/~saez/.

From the time of Herodotus in 500 B.C. to the present,

historians and political philosophers have believed that a high

level of inequality of economic and political power undermines

the basis of constitutiona’ democracy and stable government

generally: “So the Athenians had increased in strength, which

demonstrates that an equal voice in government has beneficial

impact not merely in one way, but in every way.” THE LANDMARK

HERODOTUS: THE HISTORIES 400 (Robert B. Strassler ed. 2007).

“The constitutional essential here ir rather that below a certain

level of material and social well-being, and of training and

(Continued on following page)

42a

There are many, including my colleagues, whose

preference for an unregulated laissez faire market

place is so strong that they would eliminate market

regulation through private antitrust enforcement.

Using the new Twombly pleading rule, it is possible to

do away with price fixing cases based on reasonable

inferences from strong circumstantial evidence. As in

this case, the proponents of this strategy propose to

require either an express written agreement among

competitors or a transcribed oral agreement to fix

prices. Nothing less will do. Insider testimony, a

strong motivation to collude, and aggressive, lock-

step unanimity by competitors in pricing become

insufficient to state a case. Over time, the antitrust

laws fall further into desuetude as the legal system

and the market place are manipulated to benefit

economic power, cartels, and oligopolies capable of

setting prices. This case is just one small step in that

direction. But this direction is unlikely to be changed

unless the Supreme Court steps in to make it clear

that 7wombly may not be used, as my colleagues

propose, as a cover for repealing regulation of the

marketplace through private antitrust enforcement.

education, people simply cannot take part in society as citizens,

much less equal citizens ... it is what is required to give due

weight to the idea of society as a fair system of cooperation

between free and equal citizens. ...” JOHN RAWLS, POLITICAL

LIBERALISM 166 (1993).

43a

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

No. 07-4464

In re: TRAVEL AGENT COMMISSION

ANTITRUST LITIGATION.

TAM TRAVEL, INC., et al.,

Plaintiffs-Appellants,

DELTA AIRLINES, INC., et al.,

Defendants-Appellees.

Before: MERRITT, BOGGS,

and GRIFFIN, Circuit Judges

JUDGMENT

(Filed Oct. 2, 2009)

On Appeal from the I'!»ited States District Court

for the Nerther:z. wiccrict of Ohio at Cleveland.

THIS CAUSE was heard on the record from the

district court and was argued by counsel.

IN CONSIDERATION WHEREOF, it is ORDERED

that the judgment of the district court is AFFIRMED.

ENTERED BY ORDER

OF THE COURT

/s/ Leonard Green

Leonard Green

Clerk

44a

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF OHIO

EASTERN DIVISION

IN RE: TRAVEL AGENT ) MDL Docket No. 1561

COMMISSION ANTI- ) N.D. Ohio Case

TRUST LITIGATION ) No. 1:03 CV 30000

) JUDGE

) PETER C. ECONOMUS

This D , MEMORANDUM

nyfesiiadaroniataas OPINION AND ORDER

Relates To: )

ALL ACTIONS ) (Filed Oct. 29, 2007)

This matter is before the Court upon Defendants’

Motions to Dismiss Plaintiff’s First Amended Com-

plaint made pursuant to Rule 12(b)(6). Oral argu-

ments were held on October 18, 2007.

I. BACKGROUND

The instant case is brought by travel agents who

opted out of the plaintiff class in Hall v. United Air

Lines, Inc., 296 F. Supp. 2d 652 (E.D.N.C. 2003).' The

’ The instant matter consists of two actions transferred to

this court and coordinated for pretrial proceedings: (1) Tam

Travel, Inc., et al. v. Delta Airlines, Inc., et al., filed in the U.S.

District Court for the Northern District of California on April 9,

2003; and (2) Swope Travel Agency, Inc., et al. v. Orbitz, LLC, et

al., filed in the U.S. District Court for the Eastern District of

Texas on June 5, 2003. On November 10, 2003, the Judicial

Panel on Multidistrict Litigation transferred Tam and Swope to

this District pursuant to 28 U.S.C. § 1407 so that pretrial

(Continucd on following page)

45a

Court allowed Plaintiffs in the Jam Travel action to

file an Amended Complaint on September 14, 2007, in

light of the recent Supreme Court decision in Bedl

Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007). De-

fendants, in turn, filed Motions to dismiss asserting

that Plaintiffs cannot meet the new pleading stan-

dard enunciated by the Court in Twombly. Defen-

dants Alaska Airlines, Inc. (“Alaska”), Alaska Air

Group, Inc. (“AGA”), Air Tran Airlines, Inc. (“ATA”),

American Airlines, Inc. (“American”), America West

Airlines, Inc. (“AWA”), Continental, Airlines Inc.

(“Continental”), Delta Airlines, Inc. (“Delta”), Horizon

Air Industries (“Horizon”), Frontier Airlines, Inc.

(“Frontier”), KLM Royal Dutch Airlines (“KLM”),

Northwest Airlines, Inc. (“Northwest”), and United

Airlines, Inc. (“United”) filed the following eight

Motions to Dismiss’:

Motion to Dismiss First Amended Complaint

filed by Northwest Airlines, Inc. (Dkt. #142)

12(b\(6) Motion to Dismiss Tam Travel Plain-

tiffs’ First Amended Complaint Filed by 8

Moving Defendants (Dkt. #144)

proceedings could be coordinated or consolidated with the case

Fausky, et al. v. American Airlines, et al., filed in this Court on

May 8, 2003. (Master Dkt. #1). The Fausky case has since been

dismissed. (Fausky Dkt. #25). Tam and Swope, however, remain

before the Court.

* Plaintiffs dismissed U.S. Airways, Inc. and U.S. Airways

Group on September 13, 2007 without prejudice.

46a

Motion to Dismiss First Amended Complaint

Filed by Delta Airlines, Inc. (Dkt. #145)

Motion to Dismiss the First Amended Com-

plaint filed by Frontier Airlines (Dkt. #146)

Motion to Dismiss TAM Travel Plaintiffs’

First Amended Complaint filed by America

West Airlines, Inc. (Dkt. #147)

Motion to Dismiss First Amended Complaint

Filed by Alaska Airlines (Dkt. #148)

Motion to Dismiss the First Amended Com-

plaint Filed by United Airlines, Inc. (Dkt.

#150)

Motion to Dismiss the First Amended Com-

plaint Filed by ATA Airlines (Dkt. #166)

Il. STANDARD OF REVIEW

When presented with a motion to dismiss under

Rule 12(b)\(6), a court evaluates whether a plaintiff’s

complaint pleads a cognizable claim. Gentile v. Fifth

Ave. Otolaryngology, Inc., 2006 WL 2505915 (N.D.

Ohio Aug. 28, 2006). All allegations in the complaint

must be taken as true and construed in a light most

favorable to the nonmovant. Ang v. Proctor & Gamble

Co., 932 F.2d 540, 544 (6th Cir. 1991). While the court

* Although Defendant ATA filed its Motion to Dismiss on

November 25, 2007, after the deadline, the Court will now

consider ATA’s Motion because it raises the same issues as the

other seven Motions to Dismiss.

47a

must accept a plaintiff’s factual allegations as true, it

“must not accept plaintiff’s legal conclusions or

unwarranted factual inferences as true.” Gentile,

2006 WL 2505915, at *3 (citing Lewis v. ACB Bus.

Servs., 135 F.3d 389, 405-06 (6th Cir. 1998)).

A complaint alleging a conspiracy in violation of

Section 1 of the Sherman Act, 15 U.S.C. §1, must set

forth sufficient factual allegations “to raise a right to

relief above the speculative level” and “to state a

claim to relief that is plausible on its face.” Bell

Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965,

1974 (2007). To survive a motion to dismiss, the

plaintiff must file “a complaint with enough factual

matter (taken as true) to suggest that an agreement

was made.” Jd. at 1965. Recently, the Supreme Court

addressed the sufficiency of pleadings of a Section 1

Sherman Act claim under a Fed. R. Civ. P. 12(b)(6)

standard, holding that “we do not require heightened

fact pleading of specifics, but only enough facts to

state a claim to relief that is plausible on its face.”

Twombly, 127 S. Ct. at 1974. As such, the Court did

not mandate a “heightened” pleading of specific facts,

but instead held that the facts themselves must

“raise a reasonable expectation that discovery will

reveal evidence of illegal agreement.” /d. at 1965. It is

under the “plausibility standard” set out in Twombly

that the Defendant airlines contend that the Plain-

tiffs’ antitrust claims must be dismissed.

In Twombly, the plaintiffs alleged that the defen-

dants conspired to restrain trade by inflating charges

_or local telephone and high-speed Internet services.

A&a

Id. at 1962. The plaintiffs contended that there was a

lack of meaningful competition in their telephone and

Internet markets because the defendants had en-

gaged in parallel conduct to prevent competition. Jd.

at 1962-63. The plaintiffs also stated that they had a

“belief” that the defendants entered into a contract,

combination or conspiracy to prevent competitive

entry in their markets. /d. at 1963. In examining

“what a plaintiff must plead in order to state a claim

under § 1 of the Sherman Act,” the Court determined

that stating such a claim requires a complaint with

enough factual matter (taken as true) to suggest

that an agreement was made. “Asking for plausible

grounds to infer an agreement 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.” /d. at 1965. The Court went on to

hold that “an allegation of parallel conduct and a bare

assertion of conspiracy will not suffice. Without more,

parallel conduct does not suggest conspiracy ... when

allegations of paralle] conduct are set out in order to

make a §1 claim, they must be placed in a context

that raises a suggestion of a preceeding agreement.”

Id. at 1966.

In applying the plausibility standard to the

complaint, the Court concurred with the district court

that the complaint failed because the plaintiffs based

their claims on descriptions of parallel conduct, “and

not on any independent allegation of actual ayree-

ment among |the defendants].” Jd. at 1970. The Court

49a

noted that the basis of the complaint concerned the

alleged parallel conduct of the defendants to keep

competitors out of their markets and implied that

those actions demonstrated an illegal agreement on

the part of the defendants. Jd. at 1970-71. The Court.

therefore found that the supposed agreement between

the defendants to disobey the 1996 Telecommuni-

cations Act was more of a natural and “unilateral

reaction” of each defendant to resist competition, and

that such individual actions by the defendants did not

“plausibly suggest” an agreement or conspiracy by the

defendants. /d. at 1971. Lastly, the Court emphasized

that “we do not require heightened fact pleading of

specifics, but only enough facts to state a claim to

relief that is plausible on its face,” stating that in a

complaint a plaintiff must “nudge” its §1 claim

“across the line from conceivable to plausible.” /d. at

1973.

In the instant. case, Defendants request that in light

of Theombly, the Court now determine [sic] whether

Plaintiffs’ Amended Complaint should be dismissed for

failure to state a claim under FRCP 12(b)\(6).

lil. LAW AND ANALYSIS

The Court’s construction of the Amended Com-

plaint and Defendant’s Motions to Dismiss reveals

four distinct arguments: (1) Plaintiffs have failed to

demonstrate parallel conduct with respect to AWA,

Alaska, AGA, Frontier, and Horizon; (2) Plaintiffs failed

to allege any facts regarding KLM’s participation in

50a

the alleged conspiracy; (3) Defendants Delta, United

and Northwest's assertion that Plaintiff’s Amended

Complaint should be dismissed because they have

been discharged in bankruptcy; and (4) Plaintiffs

have not plead sufficient facts that “plausibly sug-

gest” an agreement or conspiracy. The Court will

address each set of arguments in turn.

A. AWA, Alaska, Frontier, and Horizon

Defendants AWA, Alaska, Frontier, and Horizon‘

contend that Plaintiffs are unable to demonstrate

that they acted in parallel to reduce and eliminate

travel commissions between 1995 and 2002. As stated

earlier, the Court made clear in Twombly, “when

allegations of parallel conduct are set out in order to

make a § 1 claim, they must be placed in a context

that raises a suggestion of preceding agreement, not.

merely parallel conduct that could just as well be

independent action.” /d. While the larger airlines

focus on the allegations necessary to suggest the re-

quired context for a conspiracy claim (commonly re-

ferred to as “plus factors”), Defendants AWA, Alaska,

* Plaintiff also names Alaska Air Group (“AGA”), a holding

company, as a Defendant. AGA is mentioned by name only once

in the Amended Complaint. As a holding company, Defendant

AGA points out, it did not pay commissions to travel agents.

(Dkt. #148). Therefore, Plaintiffs claims against AGA must be

dismissed because there is no factual matter to plausibly sug-

gest that AGA joined or participated in an unlawful conspiracy.

Twombly 127 S. Ct. at 1956.

5la

Frontier, and Horizon assert that Plaintiffs have

failed to demonstrate parallel conduct because AWA,

Alaska, Frontier, and Horizon did not have the same

role in the reduction of travel agent commissions.

Plaintiffs allege that Defendants conspired to cap

or cut the travel agent commissions on six separate

occasions: 1995, 1997, 1998, 1999, 2001, and 2002.

1. 1995

In the Amended Complaint, Plaintiffs allege that

in 1995, Delta, American, Northwest, United and

Continental imposed a cap of $25 for one-way

domestic tickets and $50 for round-trip domestic

tickets. (Amend. Compl. 4 31). Plaintiffs do allege,

however, that AWA, Alaska, Frontier, and Horizon

imposed caps at this time.

2. 1997

Between September 18 and 25, 1997, United,

American, Delta, Northwest, Continental, U.S. Air-

ways, the airlines reduced commissions from 10 to 8

percent. (Amend. Compl. 9 34, 41). AWA reduced

commissions a few days later, on September 29th and

Alaska followed suit on September 30th. (Amend.

Compl. 440). Frontier, however, did not reduce

commissions until March 2008. (Amend. Compl.

q 41).

Between November 12 and December 2, 1998,

United, American, Delta, Northwest, Continental and

U.S. Airways imposed a cap on commissions on

international tickets. (Amend. Compl. 4 43-39). The

Amended Complaint does not allege that AWA,

Alaska, Frontier, and Horizon implement such a cap

on international commissions at this time.

4. 1999

On October 7, 1999, United reduced commissions

again from 8 to 5 percent. (Amend. Compl. { 51).

American instituted the same reduction on October 8,

with Delta and Northwest following on October 11.

(Amend. Compl. 452-54). Continental and U.S.

Airways then reduced commissions to 5 percent on

October 12. (Amend. Compl. 4 55-56). AWA and

Alaska followed suit on October 18, and Frontier

implement [sic] the reduction on November 2.

(Amend. Compl. 4 57-59).

5. 2001

On August 18, 2001, American capped commis-

sions payable to travel agents on domestic flights at

$10 and $20 for one-way and round-trip flights,

respectively. (Amend. Compl. 461). On August 22,

United and Delta implemented an identical cap, and

Northwest and U.S. Airways followed suit the next

day. (Amend. Compl. 4 64, 66). Contientnal [sic] and

AWA announced their intention to implement the cap.

53a

(Amend. Compl. 4 65, 67). Frontier and Alaska did

not follow until September 4 and November 1, re-

spectively. submit [sic] evidence that they did not

impose the commission cap until nearly three weeks

later. (Amend. Compl. 7 68, 69).

6. 2002

On March 14, 2002, Delta announced their in-

tention to eliminate the travel agents’ commissions

completely. (Amend. Compl. 471). On March 18,

American and Continental did the same. (Amend.

Compl. 9 72, 75). Northwest followed the next day,

and United eliminated the commissions on March 20.

(Amend. Compl. { 73, 74). On March 21, U.S. Airways

and AWA followed suit. (Amend. Compl. 4 76, 77). On

May 31, 2002, Frontier and Alaska also eliminated

commissions completely. (Amend. Compl. { 78, 79).

The above named airlines allege that on the six

occasions they either: (1) did not follow the commis-

sion moves of their larger competitors at all; (2) when

they did implement caps or cuts similar te those

implemented by larger airlines, they followed the

commission moves only after periods ranging from

several weeks to six months; or (3) only implemented

the caps or cuts partially.

“One does not need an agreement to bring about

this kind of follow-the-leader effect in a concentrated

industry.” Reserve Supply Corp. v. Qwens Corning

Fiberglas Corp., 971 F.8d 37, 53 (7th Cir. 1992);

United States v. Intl Harvester Co., 274 U.S. 693,

54a

708-709 (1927) (“The fact that competitors may see

proper, in the exercise of their own judgment, to

follow the prices of another [firm] does not establish

any suppression of competition or show any sinister

domination.”). Plaintiffs have not put forth any

“factual matter” suggesting that AWA, Alaska,

Frontier, and Horizon engaged in parallel conduct

because. according to the Amended Complaint, the

four airlines either failed to implement the caps

entirely or implemented the caps after the larger

airlines. Twombly, 127 S. Ct. at 1965 (“stating a claim

requires a complaint with enough factual matter

(taken as true) to suggest agreement was made.”).

Absent such evidence, Plaintiffs claims against AWA,

Alaska, Frontier, and Horizon must fail.

B. KLM

KLM asserts that Plaintiffs’ Amended Complaint

fails to allege that KLM ‘“reduceld], cap[ped) and

eliminate[d] commissions paid to travel agencies and

travel agents” at any time. (Amend. Compl. 4j 32). As

KLM points out, the Amended Complaint does not

allege any specific action taken by KLM. (Dkt. #1

144). The only appearance of KLM in the Amended

Complaint, other than its identification as a Defen-

dant, is the allegation t’ .t KLM was represented at

three trade association meetings. (Amend. Compl.

4 97, 98, 101). Because Plaintiffs failed to allege that

KLM engaged in parallel conduct, the claims against

KLM must also be dismissed.

C. Bankruptcy

Northwest, United, and Delta allege that Plain-

tiffs’ Amended Complaint must be dismissed because

it asserts a claim that has been discharged by the

bankruptcy court. Delta, Northwest, and United point

out that their reorganization plans were confirmed in

2007, 2005 and 2006, respectively. (Dkt. #143, 145,

150).” The commission reductions alleged by Plain-

tiffs, however, occurred between 1995 and March

2002. Therefore, Defendants assert that Plaintiffs’

claims must be dismissed because they accrued in

2002, prior to Defendants’ discharge in bankruptcy.

1. Public Records

Normally, when conducting a review of a 12(b)(6)

motion to dismiss, the Court cannot consider facts

outside the pleadings. In the instant case, Defendants

attached to their Motions to Dismiss, copies of orders

* Northwest, United and Delta each petitioned for Chapter

11 bankruptcy and had their reorgnization [sic] plan approved

by the bankruptcy court. On December 9, 2002, United

petitioned for Chapter 11 bankruptcy. On January 20, 2006, the

bankruptcy court confirmed United’s reorganization plan, which

became effective February 1, 2006. (Dkt. #150). On September

14, 2005, Delta filed a petition for bankruptcy in United States

Bankruptcy Court for the Southern District of New York. On

April 25, 2007, the Bankruptcy Court entered an order

confirming the reorganization plan, effective April 30, 2007.

(Dkt. #145). On September 25, 2005, Northwest filed a Notice of

Bankruptcy and the instant case was stayed against Northwest

pursuant to section 362 of the Bankruptcy Code, 11 U.S.C.

§ 362(a\1).

56a

surrounding Defendants bankruptcy petitions. These

orders are public records from United States Bank-

ruptcy Courts and, therefore, possess the requisite

level of reliability. Although the Court “must only

take judicial notice of facts which are not subject to

reasonable dispute,” Plaintiffs refer to the bankruptcy

proceedings in the Amended Complaint. Passa v. City

of Columbus, 123 Fed. Appx. 694, 697 (6th Cir. 2005).

As a result, consideration of the attachments does not

require conversion of the motion into one for sum-

mary judgment under Rule 56. Wyser-Pratte, 413 F.3d

at 560; see also Palay v. United States, 349 F.3d 418,

425 n.5 (7th Cir. 2003) (a district court is entitled to

take judicial notice of matters in the public record).

Therefore, the Court may review the public records

relied upon by Defendants.

2. Continuing Antitrust Violation

Plaintiffs argue that even though Defendants

were discharged in bankruptcy after the 2002 com-

mission reduction, the alleged conspiracy to eliminate

the travel agents’ commissions was a “continuing con-

spiracy” because the airlines “continued to abide bye

[sic] the conspiracy” after the commissions were

capped in 2002. (Dkt. #152).

“In the context of a continuing conspiracy to

violate the antitrust laws,” a cause of action accrucs

“each time a plaintiff is injured by an act of the

defendants.” Zenith Radio Corp. v. Hazeltine Re-

search, Inc., 401 U.S. 321, 338 (1971). “Thus, ‘even

57a

when a plaintiff alleges a continuing violation, an

overt act by the defendant is required to restart the

statute of limitations and the statute runs from the

last overt act.’” Peck v. General Motors Corp., 894

F.2d 844, 849 (6th Cir. 1990) (quoting Pace Indus.,

Inc. v. Three Phoenix Co., 813 F.2d 234, 237 (9th Cir.

1987)).

For purposes of claim accrual, the fact that an

antitrust plaintiff may suffer continuing damages

from an on-going conspiracy is irrelevant. In the

antitrust context, “the focus is on the timing of the

causes of injury, i.e., the defendant’s overt acts, as

opposed to the effects of the overt acts.” Id. Accord-

ingly, accrual of an antitrust claim depends on the

commission of an “injurious act” rather than “the

abatable but unabated inertial consequences” of that

act. Barnosky Oils, Inc. v. Union Oil Co. of California,

665 F.2d 74, 81 (6th Cir. 1981) (quoting Poster Ex-

change, Inc. v. National Screen Service Corp., 517

F.2d 117, 128 (5th Cir. 1975)). Although continuing

damages may of course be recovered, “if a plaintiff

feels the adverse impact of an antitrust conspiracy on

a particular date, a cause of action immediatcly

accrues to him to recover all damages incurred by

that date and all provable damages that will flow in

the future from the acts of the conspirators on that

date.” Zenith, 401 U.S. at 339.

Plaintiffs’ Amended Complaint alleges that after

the three airlines emerged from bankruptcy, they

“had knowledge” of the alleged conspiracy, “ratified”

the alleged conspiracy by failing to change its

58a

policies, and has “never taken any action to disavow”

the alleged conspiracy. (Amend. Compl. { 116-118). To

give rise to a new cause of action, “an overt act must

have two elements: 1) It must be a new and inde-

pendent act that is not merely a reaffirmation of a

previous act; and 2) it must inflict new and accumu-

lating injury on the plaintiff.” Martinez v. Western

Ohio Health Care Corp., 872 F. Supp. 469, 472 (S.D.

Ohio 1994); see also Grand Rapids Plastics, Inc. v.

Lakian, 188 F.3d 401, 406 (6th Cir. 1999); DXS, Inc. v.

Siemens Med. Sys., Inc. 100 F.3d 462, 467-68 (6th Cir.

1996); Pace, 813 F.2d at 238 (9th Cir. 1987). Thus,

even if the airlines continued to participate in the

conspiracy alleged by plaintiffs after having emerged

from bankruptcy, that fact alone would not give rise

to a new antitrust claim. See, e.g., Varner v. Peterson

Farms, 371 F.3d 1011, 1019 (8th Cir. 2004) (where

allegedly anticompetitive conduct was pursuant to

previously agreed-upon contract, conduct did not give

rise to antitrust claim, which had already accrued

when contract was signed); Kaw Valley Elec. Coop.

Co. v. Kan. Elec. Power Coop., Inc., 872 F.2d 931, 933

(10th Cir. 1989) (continued conduct based on previ-

ously taken final decision does not create new anti-

trust claim); Garelick v. Goerlich’s, Inc., 323 F.2d 854,

856 (6th Cir. 1963) (continuation of previously initi-

ated conduct does not give rise to a new antitrust

claim); Martinez, 872 F.Supp. at 472 (antitrust

defendant’s continued adherence to a prior, allegedly

unlawful decision, did not give rise to a new claim

because the plaintiffs “continue to suffer the same

59a

injury that was previously inflicted upon them, albeit

in an ever increasing amount”).

Plaintiffs allege that Delta, Northwest, and

United “conformed” their “commission levels and

caps” to those of the co-conspirators when it exited

from Chapter 11. (Amend. Compl. 4 118). But that

post-Chapter 11 “conformance” consisted solely of the

airlines continuing the same commission policies that

it had followed for years, both before and during its

Chapter 11 proceeding. Therefore, Plaintiffs are un-

able to demonstrate an overt act other than the

alleged commission reduction in 2002.

3. Pre-petition Debt

The formerly bankrupt Defendants assert that

because Plaintiff’s claim accrued in 2002, it is a pre-

petition debt that cannot be brought against them.

The Bankruptcy Code clearly provides that the con-

firmation of a reorganization plan discharges “any

debt” owed by the debtor as of the date of confirma-

tion, unless such plan provides otherwise. 11 U.S.C.

§ 1141(d)(1) (“Except as otherwise provided .. . in the

plan, ... the confirmation of a plan . . . discharges the

debtor from any debt that arose before the date of

such confirmation ... whether or not . . . the holder of

such claim has accepted the plan... .”).

Delta, Northwest, and United’s alleged liability

to Plaintiffs constitutes a “debt” within the meaning

of the Bankruptcy Code. The term “debt” is defined to

mean “liability on a claim.” 11 U.S.C. §101(12). The

60a

term “claim” is, in turn, broadly defined to mean a

“right to payment, whether or not such right is

reduced to judgment, liquidated, unliquidated, fixed,

contingent, matured, unmatured, disputed, undis-

puted, legal, equitable, secured, or unsecured.” 11

U.S.C. § 101(5). As the Supreme Court has noted,

“Congress intended by this language to adopt the

broadest available definition of ‘claim.’” Johnson uv.

Home State Bank, 501 U.S. 78, 83 (1991); see also In

re Jensen, 995 F.2d 925, 930 (9th Cir. 1993). Congress

adopted an all-encompassing definition of “claim” so

that “all legal obligations of the debtor, no matter how

remote or contingent, will be able to be dealt with in

the bankruptcy case.” H.R. REP. NO. 95-595, at 309

(1977). Accordingly, Plaintiffs’ antitrust claims “con-

stitute bankruptcy ‘claims’ within the meaning” of the

Bankruptcy Code. /n re Penn Central Transp. Co., 771

F.2d 762, 766 (3d Cir. 1985).

The court-approved bankruptcy plans for Delta,

United, and Northwest specifically provide that all

pre-petition claims against the respective airlines

were discharged. (Dkt. #150, Ex. A to Ex. 1, discharg-

ing against United, “Claims and Causes of Action of

any nature whatsoever, ... whether known or un-

known, against ... the Debtors ... , including with-

out limitation ... Causes of Action that arose before

the Confirmation Date”); (Dkt. #143, the Northwest

plan provides that “all holders of claims ... along

with their respective present or former employees,

agents, officers, directors or principals, shall be

enjoined from taking any action to interfere with the

6la

implementation or consummation of the Plan.); (Dkt.

#145, See id. 4 78 (Delta’s plan provides that, “upon

the Effective Date, all existing claims against the

Debtors and Interests in the Debtors shall] be, and

shall be deemed to be, discharged and terminated,

and all hoiders of Claims and Interests shall be

precluded and enjoined from asserting against the

Reorganized Debtors.”)

Because the three airlines were discharged in

bankruptcy proceedings, Plaintiffs are permanently

enjoined from pursuing their antitrust claim against

Delta, Northwest, and United. By statute, the dis-

charge of a debt “operates as an injunction against

the commencement or continuation of an action to

collect [or] recover ... any such debt.” 11 U.S.C.

§ 524(a\(2).

D. Joint Motion to Dismiss

Plaintiffs attempt to meet the Twombly standard

against the remaining Defendant airlines — Conti-

nental and United — by pointing to five separate facts

that suggest a conspiracy: (1) averments of parallel

conduct; (2) opportunity to conspire; (3) evidence that

the actions were against Defendants’ self-interest; (4)

evidence that information regarding the reduction of

travel agent commissions was common knowledge;

and (4) industry practice.

62a

1. Gunn Deposition

Before proceeding to the legal analysis, it is

necessary to address whether the deposition of Amer-

ican’s executive Michael W. Gunn (“Gunn”) is properly

before the Court. Plaintiff’s Amended Complaint re-

fers to portions of Gunn’s testimony. (Amend. Compl.

4 87). Defendants respond in their Motions to

Dismiss, by referring to additional portions of Gunn’s

testimony that were not included in the Amended

Complaint. (Dkt. #144).

As discussed with respect to the bankruptcy

Defendants, Rule 12(b) of the Federal Rules of Civil

Procedure provides that if “matters outside the

pleadings are presented to and not excluded by the

court, the motion shall be treated as one for summary

judgment and disposed of as provided in Rule 56, and

all parties shall be given reasonable opportunity to

present all material made pertinent to such a motion

by Rule 56.” Under certain circumstances, however, a

document that is not formally incorporated by

reference or attached to a complaint may still be

considered part of the pleadings. See 11 JAMES WM.

MOORE ET AL., MOORE’S FEDERAL PRACTICE

§ 56.30/14} (3d ed. 1998). This occurs when “a docu-

ment is referred to in the complaint and is central to

the plaintiff’s claim....” Jd. In such event, “the

defendant may submit an authentic copy to the court

to be considered on a motion to dismiss, and the

court’s consideration of the document does not require

conversion of the motion to one for summary

judgment.” /d.; see, e.g., Weiner v. Klais & Co., 108

63a

F.3d 86, 89 (6th Cir. 1997) (considering pension plan

documents that defendant attached to the motion to

dismiss part of the pleadings because the documents

were referred to in the complaint and were central to

plaintiff's claim for benefits under the plan).

In the present case, the portions of Gunn’s

deposition referred to in the Amended Complaint are

not “matters outside the pleadings.” The deposition is

referred to throughout the Amended Complaint and is

central to the Plaintiffs’ claims. The Court’s consider-

ation of the policies, therefore, does not require

conversion of Defendants’ motions to dismiss into a

[sic] motions for summary judgment. See Weiner, 108

F3d at 89. Furthermore, when “a document is

referred to in the complaint and is central to the

plaintiff's claim,” the defendant “may submit an

authentic copy to the court to be considered on a

motion te dismiss, and the court’s consideration of the

document does not require conversion of the motion to

one for summary judgment.” Jd. Therefore, the Court

will also Consider Defendant’s copy of Gunn’s July 31,

2007 deposition attached to their motion to dismiss.

(Dkt. #144, Ex. 3).

1. Parallel Conduct

In the Amended Complaint, Plaintiffs added a

section titled “Simultaneity and Uniformity of Com-

mission Cuts and Caps.” Paragraph 28 states that “at

a time unknown to Plaintiffs, Defendants, through

their top executives and Chief Officers, agreed that

64a

they would collectively act to cap, reduce and ulti-

mately eliminate commissions paid to travel agents

for the sale of airline tickets. (Amend. Compl. 928).

As the Court pointed out in Twombly, “a district

court must retain the power to insist upon some

specificity in pleading before allowing a potentially

massive factual controversy to proceed.” Twombly,

127 S. Ct. at 1966. There must be more than “a few

stray statements [that] speak directly of agreement.”

Id. at 1970. For example, the plaintiffs in Twombly al-

leged that “ILECs engaged in a ‘contract, combination

or conspiracy’ and agreed not to compete with one

another.” Jd. The Court held that “on fair reading ...

[those] are merely legal conclusions.” Jd. Similarly, in

In re Elevator Antitrust Litig., the court held that,

“averments of agreements made at some unidentified

place and time ... are insufficient to establish a

plausible inference of agreement, and therefore to

state a claim.”

Plaintiffs’ Amended Complaint alleges that De-

fendants took parallel actions to reduce or limit

commissions paid to travel agents on six occasions,

pointing to similar pricing and proximity in time as

indications that Defendants conspired. As stated

earlier, Twombly requires more than averments of

parallel conduct, and “without some further factual

enhancement it stops short of the line between

possibility and plausibility of entitlement to relief.”

Twombly, 127 S.Ct. at 1966. Therefore, Plaintiffs

assertion of parallel conduct alone is not enough to

meet the requirements under Twombly. As a result,

65a

the Court will now turn to the additional factual

assertions Plaintiffs offer as evidence of the con-

spiracy.

2. Opportunities to Conspire

The Amended Complaint also includes an “Op-

portunities for Defendants to Combine and Conspire”

Section. Specifically, Plaintiffs allege that Defendants

met frequently during the period when the cuts and

caps were allegedly negotiated. (Amend. Compl. {90-

102). Additionally, Plaintiffs point out that Defen-

dants had the opportunity to conspire at private

meetings (Amend. Compl. 492); through industry

associations (Amend, Compl. 93, 95, 97, 98); at trade

shoes [sic] (Amend. Compl. 496); through jointly

formed business ventures (Amen. [sic] Compl. 999);

and while playing golf (Amend. Compl. 4102).

Proof that Defendants had an opportunity to

conspire does not satisfy Plaintiff's burden of proving

a price-fixing agreement, Petruzzi’s IGA Super-

markets, Inc. v. Darlin-Delaware Co., 998 F.2d 1224,

124 n.15 (3rd Cir. 1993) (“Proof of opportunity to

conspire, without more, will not sustain an inference

that a conspiracy has taken place.”); Weit v. Contt-

nental Illinois National Bank, 641 F.2d 457, 468-469

(7th Cir. 1981) (affirming directed verdict and noting

that evidence that “points of contact or relationships

for promotion of mutual interest existed among the

defendants” did not give rise to an reasonable in-

ference of conspiracy). Plaintiffs assertion of an

66a

opportunity to conspire, without more, does not

suggest that there was an agreement to reduce com-

missions.

3. Against Self-Interest

In a section of the Amended Compiaint titled

“Commission Cuts Against Defendants’ Individual

Self-Interest,” Plaintiffs allege that “any airline uni-

laterally [reducing or capping travel agent com-

missions] would suffer a substantial loss of business

when travel agents directed their customers to other

airlines that had not reduced and/or capped.” (Amen.

[sic] Compl. 981). Plaintiffs support is not grounded

in fact but merely a conclusory statement that

airlines would reduce or cap commissions “only if a

common understanding existed.” /d. Plaintiffs only

rely on United and American's failed attempt to

institute commission reductions in the 1980s.

(Amend. Compl. 4 85). Plaintiffs also allege that:

On July 31, 2007, Michael Gunn, former

Executive Vice President of Marketing and

Planning of American testified that ‘industry

consensus’ on new commission levels was

necessary for the commission cuts and caps

to hold. Mr. Gunn further testified that if

any other Defendant set commission rates

either above or below the new level, other

Defendants would be forced to rescind the

cuts. Mr. Gunn further testified that he had

to match commission cuts exactly or he

would undercut the movement by Defen-

dants to reduce and cap commissions.

67a

(Amend. Compl. 4 87). Defendants, however, cite a

portion of Gunn’s deposition transcript to counter

Plaintiffs’ assertion that “industry c

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