Jan. 4, 2011 – Defendant cell phone companies Verizon, AT&T, Sprint, and T-Mobile lost their request for a ruling that would have nixed a second amended complaint in a class action lawsuit alleging the companies conspired to fix text messaging prices.

On interlocutory appeal, a panel for the U.S. Court of Appeals for the Seventh Circuit rejected the cell phone providers’ argument that a second amended complaint did not meet the pleading standard set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).

The Sherman Act forbids competitors from agreeing or conspiring not to compete. Twombly, decided in 2007, made it more difficult for plaintiff’s to survive a motion to dismiss. Under Twombly, the plaintiff’s complaint needed to allege facts to show a conspiracy was plausible.

The cell phone providers argued that the amended complaint “alleges merely that they are not competing” without facts alleging a conspiracy. The appeals panel disagreed.

The complaint alleged that defendants sell 90 percent of text messaging services, exchanged price information at association meetings, increased prices despite falling costs, and changed complex pricing structures to uniform pricing structure at the same time.

This evidence was sufficient to show a conspiracy was “plausible,” the panel explained, and direct evidence of an agreement is not necessary to satisfy plausibility under Twombly. 

“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 provides a sufficiently plausible case of price fixing to warrant allowing the plaintiffs to proceed to discovery,” Judge Richard Posner wrote.

The case returns to the U.S. District Court for the Northern District of Illinois, Eastern Division.

By Joe Forward, Legal Writer, State Bar of Wisconsin