In the
United States Court of Appeals
For the Seventh Circuit
No. 10-8037
IN RE:
T EXT M ESSAGING A NTITRUST L ITIGATION.
A PPEAL OF:
V ERIZON W IRELESS, et al.,
Defendants.
Petition for Interlocutory Appeal from the
United States District Court for the
Northern District of Illinois, Eastern Division.
MDL No. 1997, Case No. 08 C 7082—Matthew F. Kennelly, Judge.
S UBMITTED D ECEMBER 2, 2010—D ECIDED D ECEMBER 29, 2010
Before P OSNER, W OOD , and T INDER, Circuit Judges.
P OSNER, Circuit Judge. A class action suit that has
been consolidated for pretrial proceedings in the
district court in Chicago charges the defendants with
conspiring to fix prices of text messaging services in
violation of federal antitrust law. The district court
allowed the plaintiffs to file a second amended com-
plaint despite the defendants’ objection, based on Bell
2 No. 10-8037
Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), that the
second complaint like the first failed to state a claim.
The defendants asked the district judge to certify, for
interlocutory appeal under 28 U.S.C. § 1292(b), the ques-
tion of the complaint’s adequacy. The judge agreed.
He said: “Though (as plaintiffs argue) the Seventh
Circuit had issued dozens of decisions concerning the
application of Twombly, the contours of the Supreme
Court’s ruling, and particularly its application in the
present context, remain unclear. The Court believes this
is a subject on which reasonable minds could differ. The
question presented is controlling, because there is at
least a decent chance (though it is by no means certain)
that were a court to rule the second amended com-
plaint deficient, the case would be over. Finally, there is
a good chance that immediate review may materially
advance the ultimate conclusion of the case.”
Section 1292(b) requires our permission to appeal as
well as the district court’s. The defendants have asked
our permission and the plaintiffs urge us to turn them
down. They argue that the proposed appeal does not
present a “controlling question of law,” as the statute
requires. The question presented is whether the sec-
ond amended complaint states a claim under the stand-
ard for pleading set forth in Twombly. It is a controlling
question, because if the second amended complaint
does not state a claim, the case is likely (though, as the
district judge said, not certain) to be over; the plaintiffs
are unlikely without discovery to be able to allege ad-
ditional facts that would persuade the district court
to allow them to file a third amended complaint if we
held that the second should have been dismissed.
No. 10-8037 3
But is it a controlling question of law? It is not an
abstract legal question such as whether the Sherman Act
forbids price fixing; it is a question whether a par-
ticular complaint satisfies the pleading standard of
Twombly. Yet the question’s narrowness should not dis-
qualify it, at least in the rather special circumstances
presented by the appeal. Suppose the defendants had
been overheard to say to each other “let’s fix our ice
machines,” and the controlling question in the case
was whether “ice machines” was a euphemism for
prices of text messaging services. That would be a ques-
tion of fact—and it would be pointless to allow an inter-
locutory appeal from its resolution. Disputed facts are
resolved at trial—by the verdict if it’s a jury trial and
if it’s a bench trial by the judge’s findings of fact—and
thus resolution comes at the end of the trial, which ordi-
narily is too late for an interlocutory appeal. Though
there are cases in which a protracted hearing on relief
follows the determination of liability, one can under-
stand why Congress didn’t think it necessary to
authorize interlocutory appeals to decide whether a
finding of fact by a district court was clearly erroneous.
The interlocutory appeal that we are asked to
authorize in this case does not seek to overturn any
findings of fact. The defendants are arguing rather that
even if all the factual allegations of the complaint are
true, the complaint is insufficiently plausible to satisfy
Twombly. They are asking us to apply a legal standard—
the pleading standard set forth in Twombly—to a set of
factual allegations taken as true for purposes of the appeal.
4 No. 10-8037
A challenge to a trial court’s application of a legal
standard to a set of facts is often described as presenting
a “mixed question of fact and law” or an “ultimate ques-
tion of fact,” but these are not helpful labels. The ap-
pellate court’s task in such a case is to determine the
legal significance of a set of facts. In Pullman-Standard
v. Swint, 456 U.S. 273, 289 n. 19 (1982), the Supreme
Court left open the question whether appellate review
of such a determination should be deferential, just as
it is when reviewing findings of fact, but the rule in our
court is that it should be. The main task of an appellate
court, which is to maintain the coherence, uniformity,
and predictability of the law, is not engaged by review
of the application of a legal standard to a unique, non-
recurring set of particular facts. Wellpoint, Inc. v. Commis-
sioner, 599 F.3d 641, 644 (7th Cir. 2010); Barber v. Rose, 7
F.3d 636, 642-43 (7th Cir. 1993); Mucha v. King, 792 F.3d
602, 605-06 (7th Cir. 1986). No matter; in this case we
have neither factfindings nor the application of a legal
standard to factfindings; the question presented by the
appeal is the sufficiency of the allegations of a com-
plaint; and, most important, that question requires the
interpretation, and not merely the application, of a legal
standard—that of Twombly.
Furthermore, when the question presented by an
appeal is whether Twombly requires dismissal of a com-
plaint, the concerns underlying that decision argue for
empowering the district court and the court of appeals
to authorize an interlocutory appeal. Twombly, even
more clearly than its successor, Ashcroft v. Iqbal, 129 S. Ct.
1937 (2009), is designed to spare defendants the expense
No. 10-8037 5
of responding to bulky, burdensome discovery unless
the complaint provides enough information to enable
an inference that the suit has sufficient merit to war-
rant putting the defendant to the burden of responding
to at least a limited discovery demand. When a district
court by misapplying the Twombly standard allows
a complex case of extremely dubious merit to proceed,
it bids fair to immerse the parties in the discovery
swamp—“that Serbonian bog . . . where armies whole
have sunk” (Paradise Lost ix 592-94)—and by doing so
create irrevocable as well as unjustifiable harm to the
defendant that only an immediate appeal can avert.
Such appeals should not be routine, and won’t be,
because as we said both district court and court of
appeals must agree to allow an appeal under section
1292(b); but they should not be precluded altogether by
a narrow interpretation of “question of law.”
Now it is true that we ruled in Ahrenholz v. Board of
Trustees of University of Illinois, 219 F.3d 674, 676 (7th
Cir. 2000), that the term “question of law” in section
1292(b) refers “to a question of the meaning of a
statutory or constitutional provision, regulation, or com-
mon law doctrine rather than to whether the party op-
posing summary judgment had raised a genuine issue
of material fact.” We pointed out that “to decide
whether summary judgment was properly granted
requires hunting through the record compiled in the
summary judgment proceeding to see whether there
may be a genuine issue of material fact lurking there;
and to decide a question of contract interpretation
may require immersion in what may be a long, detailed,
6 No. 10-8037
and obscure contract,” whereas “if a case turned on a
pure question of law, something the court of appeals
could decide quickly and cleanly without having to
study the record, the court should be enabled to do so
without having to wait till the end of the case.” Id. at 677;
see also Johnson v. Jones, 515 U.S. 304, 309 (1995); Boim
v. Quranic Literacy Institute, 291 F.3d 1000, 1007 (7th
Cir. 2002); In re Hamilton, 122 F.3d 13 (7th Cir. 1997);
Malbrough v. Crown Equipment Corp., 392 F.3d 135, 136
(5th Cir. 2004); Foster Wheeler Energy Corp. v. Metropolitan
Knox Solid Waste Authority, Inc., 970 F.2d 199, 202 (6th
Cir. 1992); Harriscom Svenska AB v. Harris Corp., 947 F.2d
627, 631 (2d Cir. 1991). As we read in Malbrough v. Crown
Equipment Corp., supra, 392 F.3d at 136, “the underlying
issue of whether [the plaintiff] has presented sufficient
evidence to show a ‘genuine issue . . . [of] material fact’,
and thus avoid summary judgment . . ., is not a question
of law within the meaning of § 1292(b).”
But in this case there is no question of hunting
through a record or immersing ourselves in a com-
plicated contract, and moreover we do have a question
of the meaning of a common law doctrine—namely the
federal common law doctrine of pleading in complex
cases, announced in Twombly. Decisions holding that
the application of a legal standard is a controlling ques-
tion of law within the meaning of section 1292(b) are
numerous. See Portis v. City of Chicago, 613 F.3d 702
(7th Cir. 2010); Armstrong v. LaSalle Bank Nat’l Ass’n, 552
F.3d 613, 615-16 (7th Cir. 2009); Florence v. Board of
Chosen, 621 F.3d 296, 301 (3d Cir. 2010); Weintraub v. Board
of Educ. of City School Dist., 593 F.3d 196, 200-01 (2d Cir.
No. 10-8037 7
2010); Brabham v. A.G. Edwards & Sons Inc., 376 F.3d
377, 380 (5th Cir. 2004); Johnson v. Dayton Elec. Mfg. Co.,
140 F.3d 781, 783-84 (8th Cir. 1998); Kirkpatrick v. J.C.
Bradford & Co., 827 F.2d 718, 720-21 (11th Cir. 1987).
Not that routine applications of well-settled legal stan-
dards to facts alleged in a complaint are appropriate
for interlocutory appeal. But Twombly is a recent deci-
sion, and its scope unsettled (especially in light of its
successor, Iqbal—from which the author of the majority
opinion in Twombly dissented; and two of the Justices
who participated in those cases have since retired).
This court has only twice discussed the application of
Twombly to antitrust violations, and in both cases only
in passing. Tamburo v. Dworkin, 601 F.3d 693, 699-700
(7th Cir. 2010); Sheridan v. Marathon Petroleum Co., 530
F.3d 590, 595, 596 (7th Cir. 2008). Pleading standards in
federal litigation are in ferment after Twombly and Iqbal,
and therefore an appeal seeking a clarifying decision
that might head off protracted litigation is within the
scope of section 1292(b). Cf. Boim v. Quranic Literacy
Institute, supra, 291 F.3d at 1007. The previous cases
do not address the relation of Twombly to the standards
for interlocutory appeals under that section, and that is
a further novelty that justifies the conclusion that the
appeal presents a genuine question of law.
So we grant the application for interlocutory appeal,
and, since the merits of the appeal have been fully
briefed in the parties’ submissions and would not, we
think, be illuminated by oral argument, we proceed to
the merits.
8 No. 10-8037
The complaint in Twombly alleged that the regional
telephone companies that were the successors to the
Bell Operating Companies which AT&T had been forced
to divest in settlement of the government’s antitrust suit
against it were engaged in “parallel behavior.” Bluntly,
they were not competing. But section 1 of the Sherman
Act, under which the suit had been brought, does not
require sellers to compete; it just forbids their agreeing
or conspiring not to compete. So as the Court pointed
out, a complaint that merely alleges parallel behavior
alleges facts that are equally consistent with an infer-
ence that the defendants are conspiring and an infer-
ence that the conditions of their market have enabled
them to avoid competing without having to agree not
to compete. The core allegations of the complaint
in Twombly were simply that “In the absence of any
meaningful competition between the [defendants] in one
another’s markets, and in light of the parallel course of
conduct that each engaged in to prevent competition
from [other carriers] within their respective local tele-
phone and/or high speed internet services markets
and the other facts and market circumstances alleged
above, Plaintiffs allege upon information and belief
that [the defendants] have entered into a contract, combi-
nation or conspiracy to prevent competitive entry in
their respective local telephone and/or high speed
internet services markets and have agreed not to
compete with one another and otherwise allocated cus-
tomers and markets to one another.” Id. at 551.
Our defendants contend that in this case too the com-
plaint alleges merely that they are not competing. But
No. 10-8037 9
we agree with the district judge that the complaint
alleges a conspiracy with sufficient plausibility to
satisfy the pleading standard of Twombly. It is true as
the defendants contend that the differences between the
first amended complaint, which the judge dismissed,
and the second, which he refused to dismiss, are slight;
but if his refusal to dismiss the second complaint is prop-
erly described as a reconsideration of his ruling on the
first, so what? Judges are permitted to reconsider their
rulings in the course of a litigation.
The second amended complaint alleges a mixture
of parallel behaviors, details of industry structure,
and industry practices, that facilitate collusion. There is
nothing incongruous about such a mixture. If parties
agree to fix prices, one expects that as a result they
will not compete in price—that’s the purpose of
price fixing. Parallel behavior of a sort anomalous in a
competitive market is thus a symptom of price fixing,
though standing alone it is not proof of it; and an
industry structure that facilitates collusion constitutes
supporting evidence of collusion. An accusation that
the thousands of children who set up makeshift
lemonade stands all over the country on hot summer
days were fixing prices would be laughed out of court
because the retail sale of lemonade from lemonade
stands constitutes so dispersed and heterogeneous and
uncommercial a market as to make a nationwide con-
spiracy of the sellers utterly implausible. But the com-
plaint in this case alleges that the four defendants sell
90 percent of U.S. text messaging services, and it would
not be difficult for such a small group to agree on
10 No. 10-8037
prices and to be able to detect “cheating” (underselling
the agreed price by a member of the group) without
having to create elaborate mechanisms, such as an ex-
clusive sales agency, that could not escape discovery by
the antitrust authorities.
Of note is the allegation in the complaint that the defen-
dants belonged to a trade association and exchanged
price information directly at association meetings. This
allegation identifies a practice, not illegal in itself, that
facilitates price fixing that would be difficult for the
authorities to detect. The complaint further alleges that
the defendants, along with two other large sellers of
text messaging services, constituted and met with each
other in an elite “leadership council” within the associa-
tion—and the leadership council’s stated mission was
to urge its members to substitute “co-opetition” for
competition.
The complaint also alleges that in the face of steeply
falling costs, the defendants increased their prices. This
is anomalous behavior because falling costs increase a
seller’s profit margin at the existing price, motivating
him, in the absence of agreement, to reduce his price
slightly in order to take business from his competitors,
and certainly not to increase his price. And there is
more: there is an allegation that all at once the defendants
changed their pricing structures, which were heteroge-
neous and complex, to a uniform pricing structure, and
then simultaneously jacked up their prices by a third. The
change in the industry’s pricing structure was so rapid,
the complaint suggests, that it could not have been ac-
complished without agreement on the details of the new
No. 10-8037 11
structure, the timing of its adoption, and the specific
uniform price increase that would ensue on its adoption.
A footnote in Twombly had described the type of evi-
dence that enables parallel conduct to be interpreted as
collusive: “Commentators have offered several examples
of parallel conduct allegations that would state a
[Sherman Act] § 1 claim under this standard . . . [namely,]
‘parallel behavior that would probably not result
from chance, coincidence, independent responses to com-
mon stimuli, or mere interdependence unaided by an
advance understanding among the parties’ . . .[;] ‘conduct
[that] indicates the sort of restricted freedom of action
and sense of obligation that one generally associates
with agreement.’ The parties in this case agree that ‘com-
plex and historically unprecedented changes in pricing
structure made at the very same time by multiple com-
petitors, and made for no other discernible reason’
would support a plausible inference of conspiracy.”
Bell Atlantic Corp. v. Twombly, supra, 550 U.S. at 557 n. 4
(citations omitted). That is the kind of “parallel plus”
behavior alleged in this case.
What is missing, as the defendants point out, is the
smoking gun in a price-fixing case: direct evidence,
which would usually take the form of an admission by
an employee of one of the conspirators, that officials of
the defendants had met and agreed explicitly on the
terms of a conspiracy to raise price. The second amended
complaint does allege that the defendants “agreed to
uniformly charge an unprecedented common per-
unit price of ten cents for text messaging services,” but
12 No. 10-8037
does not allege direct evidence of such an agreement;
the allegation is an inference from circumstantial evi-
dence. Direct evidence of conspiracy is not a sine qua non,
however. Circumstantial evidence can establish an anti-
trust conspiracy. Monsanto Co. v. Spray-Rite Service Corp.,
465 U.S. 752, 764 (1984); Miles Distributors, Inc. v. Specialty
Construction Brands, Inc., 476 F.3d 442, 449 (7th Cir.
2007); In re High Fructose Corn Syrup Antitrust Litigation,
295 F.3d 651, 661-62 (7th Cir. 2002); Craftsmen Limousine,
Inc. v. Ford Motor Co., 363 F.3d 761, 771 (8th Cir. 2004);
Lantec, Inc. v. Novell, Inc., 306 F.3d 1003, 1028 (10th Cir.
2002); Rossi v. Standard Roofing, Inc., 156 F.3d 452, 465
(3d Cir. 1998); Johnson v. Hospital Corp. of America, 95
F.3d 383, 392 (5th Cir. 1996). We need not decide
whether the circumstantial evidence that we have sum-
marized is sufficient to compel an inference of con-
spiracy; the case is just at the complaint stage and the
test for whether to dismiss a case at that stage turns on
the complaint’s “plausibility.”
The Court said in Iqbal that the “plausibility standard is
not akin to a ‘probability requirement,’ but it asks for
more than a sheer possibility that a defendant has
acted unlawfully.” 129 S. Ct. at 1949. This is a little
unclear because plausibility, probability, and possibility
overlap. Probability runs the gamut from a zero likeli-
hood to a certainty. What is impossible has a zero likeli-
hood of occurring and what is plausible has a mod-
erately high likelihood of occurring. The fact that the
allegations undergirding a claim could be true is no
longer enough to save a complaint from being dismissed;
the complaint must establish a nonnegligible probability
No. 10-8037 13
that the claim is valid; but the probability need not be
as great as such terms as “preponderance of the evidence”
connote.
The plaintiffs have conducted no discovery. Discovery
may reveal the smoking gun or bring to light addi-
tional circumstantial evidence that further tilts the
balance in favor of liability. All that we conclude at this
early stage in the litigation is that the district judge was
right to rule that the second amended complaint pro-
vides a sufficiently plausible case of price fixing to
warrant allowing the plaintiffs to proceed to discovery.
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