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Media Alerts - SD3, LLC v. Black & Decker (U.S.) Inc. -- Fourth Circuit
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October 5, 2015
  SD3, LLC v. Black & Decker (U.S.) Inc. -- Fourth Circuit
Headline: Twombly's "Parallel Plus More" Rule Does Not Require a Heightened Standard of Review at the Motion to Dismiss Stage in Antitrust Cases

Areas of Law: Business Law, Antitrust Law

Question Presented: Whether the Twombly requirement to plead parallel conduct plus something more in a §1 Sherman antitrust conspiracy claim imposes a heightened probability standard at the motion-to-dismiss stage.

Brief Summary: This antitrust case hinges on the Fourth Circuit's reading of the 12(b)(6) motion to dismiss standard announced in Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). The majority found that a plaintiff need only plausibly allege parallel conduct by defendant companies in addition to specific details of conduct in furtherance of the conspiracy to survive a motion to dismiss.

The district court's decision to dismiss SawStop's group boycotting claim was vacated and remanded for further proceeding against only the companies that were specifically accused of participating in the boycott. Additionally, the district court's decision to dismiss all other defendants and all other claims was affirmed. The dissent countered that Twombly imposed a heightened plausibility standard (more akin to a probability inquiry) in antitrust cases. According to the dissent's reading of Twombly, SawStop was rightly dismissed by the district court because there was an obvious alternate explanation for means-based parallel conduct, and SawStop was unable to provide the level of detail necessary to satisfy the "plus more" requirement.

Extended Summary: In the 1990s, plaintiff-appellant SawStop's founder, Stephen Gass, created active injury mitigation technology ("AIMT") that stops and retracts the blade of a table-saw when it detects fingers. Gass and his co-inventors took their prototype to a trade show to pursue licensing agreements. SawStop attracted the interest of a number of table-saw manufacturers and soon began negotiations with four well-known companies. After negotiations fell apart, SawStop sued.

In a complaint filed in the district court, SawStop first alleged a "group boycott conspiracy." SawStop contended that the table-saw manufacturers made an agreement in October 2001 that either all of them would adopt the AIMT or none of them would in order to protect against product liability exposure. By 2002, manufacturers who were already negotiating with SawStop ended discussions for a variety of different reasons or no reason at all.

SawStop next alleged a "standard rejection conspiracy." Under this claim, SawStop argued that its failed attempts to change table-saw safety standards was due to table-saw manufacturers convincing members to vote as a block and prevent the AIMT proposal from being adopted.

Finally, SawStop alleged a "contrived standard conspiracy." Under this theory, SawStop maintained that the defendants conspired to develop safety standards that would impose unnecessary costs on SawStop and further prevent adoption of the AIMT.

Based on the above three conspiracies, SawStop filed a complaint in February 2014 in the U.S. District Court for Eastern District of Virginia against twenty-two separate table-saw manufacturer defendants, alleging violation of §1 of the Sherman Act. Defendants moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). The district court granted the motion due to SawStop's lack of direct evidence to support its claims.

Reviewing the motion to dismiss de novo, the United States Court of Appeals for the Fourth Circuit panel accepted as true all well-pled facts in the complaint and construed them in the light most favorable to SawStop. The court found that SawStop did not make a factual showing that each defendant conspired in violation of the antitrust laws. Due to SawStop's failure to specify the ways in which particular defendants were involved in each of the alleged conspiracies, the court affirmed the dismissal on all counts against seven of the twenty-two defendants. Although separately alleged, both standard-setting conspiracies failed because the facts of SawStop's complaint did not demonstrate anything other than ordinary participation in lawful standard-setting processes.

As to the group boycotting conspiracy, SawStop was required, under Twombly, to (1) show parallel action and something "more" that indicates agreement and (2) anticompetitive harm. The court held that the district court erred in using a probability-focused standard to conclude that SawStop had not provided enough evidence to support its claim. The court explained that Twombly's requirement to plead something more than parallel conduct does not impose a probability standard at the motion to dismiss stage. While the law did require the plaintiff to surmount a "plausibly suggesting" threshold at the pleading stage, that hurdle is considerably less than the "tends to rule out possibility" standard for summary judgment. Thus, by alleging that each manufacturer eventually ended negotiations (or reached the same end goal) after the secret meeting, and providing details regarding the participants of the boycott, time, place, manner of boycott, and motive to boycott - the court found that the group boycott, when construed in the light most favorably for SawStop, was plausibly alleged.

The court remanded the case, however, on the issue of anti-competitive harm because it was inadequately briefed and the district court's opinion offered no guidance.

Judge Wynn, in a concurring opinion, praised the majority for exercising judicial restraint by addressing SawStop's complaint as written instead of dismissing SawStop's case for policy reasons. Pointing to specific facts in SawStop's complaint regarding secret meetings and other details, Judge Wynn reaffirmed the plausibility of SawStop's group boycotting claim while pointing out the ways in which he believed Judge Wilkinson's reading of Twombly to be incorrect.

In his dissent, Judge Wilkinson presented his position that an ends-based approach instead of a means-based approach to finding parallel action undermines Twombly. Here, the many companies that ended negotiations with SawStop did so at different times and provided a variety of practical and legal explanations for their actions. Reading Twombly to require a heightened plausibility standard in antitrust cases, Wilkinson wrote that a plaintiff alleging a §1 violation of the Sherman Act fails to adequately plead his claim if there is an obvious, unrebutted alternative explanation for the defendant's conduct. Judge Wilkinson asserted that the majority, in his view, made mere communication the touchstone of liability in antitrust cases - creating a chilling effect amongst companies and rewarding the least marketable products with the greatest possibility of litigation success.

To read the full opinion click here.

Panel: Judges Agee, Wynn, and Wilkinson

Argument Date: 05/12/2015

Date of Issued Opinion: 09/15/2015

Docket Number: No. 14-1746

Decided: Affirmed in part, vacated in part, and remanded by published opinion

Case Alert Author: Nakisha Small, Univ. of Maryland Carey School of Law

Counsel: Joel Davidow, CUNEO GILBERT & LADUCA, LLP, Washington, D.C., for Appellants. James Scott Ballenger, LATHAM & WATKINS, LLP, Washington, D.C., for Appellees. ON BRIEF: Jonathan W. Cuneo, Matthew E. Miller, CUNEO GILBERT & LADUCA, LLP, Washington, D.C., for Appellants. John D. Harkrider, Richard B. Dagen, AXINN, VELTROP & HARKRIDER LLP, Washington, D.C., Bernard J. DiMuro, DIMURO GINSBERG PC, Alexandria, Virginia, for Appellees Stanley Black & Decker, Incorporated, Black & Decker (U.S.) Incorporated, and Black & Decker Corporation; Christopher S. Yates, Christopher B. Campbell, Aaron T. Chiu, LATHAM & WATKINS LLP, San Francisco, California, for Appellee Emerson Electric Company; Paul Devinsky, Stefan M. Meisner, MCDERMOTT WILL & EMERY LLP, Washington, D.C., for Appellees Hitachi Koki USA Ltd. and Hitachi Koki Co., Ltd.; Lee H. Simowitz, Elizabeth A. Scully, Katherine L. McKnight, BAKER & HOSTETLER LLP, Washington, D.C., for Appellees Makita USA Incorporated and Makita Corporation; David M. Foster, Washington, D.C., Layne E. Kruse, Eliot Fielding Turner, FULBRIGHT & JAWORSKI LLP, Houston, Texas, for Appellees Robert Bosch Tool Corporation and Robert Bosch GmbH; James G. Kress, BAKER BOTTS L.L.P., Washington, D.C., Scott W. Hansen, Steven P. Bogart, James N. Law, REINHART BOERNER VAN DEUREN S.C., Milwaukee, Wisconsin, for Appellees Milwaukee Electric Tool Corporation, One World Technologies, Incorporated, OWT Industries, Incorporated, Ryobi Technologies, Incorporated, Techtronics Industries Co., Ltd., and Techtronic Industries North America, Incorporated. Seth D. Greenstein, David D. Golden, CONSTANTINE CANNON LLP, Washington, D.C., for Amici Curiae.

Author of Opinion: Judge Agee

Case Alert Supervisor: Professor Renée Hutchins

    Posted By: Renee Hutchins @ 10/05/2015 04:17 PM     4th Circuit  

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