Thursday, July 21, 2011, 4:49 PM

California Court Relies on “Common Sense” in Rejecting Twombley Challenge

Perhaps there is life for conclusory antitrust claims after Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). On May 24, the United States District Court for the Central District of California denied a motion to dismiss allegations that Duro Bag Manufacturing Company (“Duro”) put one of its primary competitors−plaintiff Western Pacific Kraft, Inc. (“WPK”)−out of business. WPK−which is also supplied by Duro−alleged that by raising its prices to WPK, and concurrently lowering its own prices to WPK’s customers, Duro violated the California Business and Professions Code provision that prohibits secretly extending special privileges to certain purchasers. In other words, WPK alleges that Duro implemented a “price squeeze.”

Citing Twombly and Ashcroft v. Iqbal, 129 U.S. 1937 (2009), Duro countered that WPK’s allegations did not plead sufficient factual allegations to show that Duro’s price discriminations were “secret.” However, the Court acknowledged that even if Duro informed WPK it would no longer adhere to the old pricing arrangement, it still acted “secretly” by surreptitiously raising its prices to WPK’s customers. The Court also rejected Duro’s argument that WPK failed to adequately allege how it was injured: Because “virtually all of the plaintiff WPK’s major customers began buying paper products directly from defendant Duro,” Duro allegedly effectively ran WPK out of business.

Many would argue that WPK’s allegations are of the “conclusory” nature that Twombly proscribes. Nevertheless, the Court held that WPK’s allegations were sufficiently “plausible” to pass muster. The Court emphasized the need to rely on “judicial experience and common sense” in measuring a Twombly challenge, suggesting that courts should look outside the verbiage of Twombley and Iqbal. Is this “common sense” standard any different than Twombly’s “plausibility” standard? Both seem equally ambiguous. Moving forward, it will be interesting to see if other courts adduce similar reasoning in handling the litany of Twombly challenges that have become a staple in judicial dockets.


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