Judge Posner Texts Twombly No Bar To Texters’ Circumstantial Class Action

In an opinion written by antitrust expert Judge Richard Posner, the U.S. Court of Appeals for the Seventh Circuit has rejected a bid by defendant cell phone companies to throw out a class action alleging that the companies conspired to fix text message prices.

The Seventh Circuit held that the plaintiffs’ second amended complaint in In re: Text Messaging Antitrust Litigation contained enough circumstantial evidence to allow the case to proceed to discovery.  The decision a applies – and clarifies – the heightened federal pleading standards laid out recently by the U.S. Supreme Court in Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal.

In rejecting a bid by cell phone companies to throw out a putative class action alleging that the companies conspired to fix text message prices, the Seventh Circuit held that the plaintiffs’ second amended complaint contained enough circumstantial evidence to allow the case to proceed to discovery.

The ruling is significant because it shows that while direct “smoking-gun” evidence is of course helpful, mere circumstantial evidence of a conspiracy to unreasonably restrain trade can also be sufficient to get past the pleading stage.

The second amended complaint alleged that the cell phone companies belonged to a trade association and exchanged price information at association meetings.  The complaint also alleged that the defendants went from having different pricing structures to implementing a uniform pricing structure, and then simultaneously increased prices by a third.