Sixth Circuit Revives Carpet Wars

The U.S. Court of Appeals for the Sixth Circuit has revived an antitrust suit brought by carpet dealer Watson Carpet & Floor Covering, Inc. alleging rival dealer Carpet Den Inc. and supplier Mohawk Industries Inc. conspired against Watson to harm its business.

In Watson Carpet & Floor Covering, Inc. v. Mohawk Industries Inc. et al., No. 09-6140, the Sixth Circuit reversed the lower court’s ruling that Watson had failed to state a claim under the pleading standard set forth by the Supreme Court in Bell Atlantic Corp. v. Twombly.  According to the appeals court, Watson’s allegations of an agreement to restrain trade and subsequent acts in furtherance of the conspiracy were sufficient to overcome a motion to dismiss.

The Watson decision came on June 22 – just one day after the same court upheld the dismissal of an antitrust complaint on Twombly/Iqbal grounds even though the information needed to establish the plaintiffs’ claims was controlled by the defendants.  In that case, New Albany Tractor, Inc. v. Louisville Tractor, Inc., No. 10-5100, the court’s decision to uphold the dismissal appeared to have been made reluctantly.  The appellate court all but bemoaned the fact that, under the binding precedent of the Supreme Court’s Iqbal decision, no discovery could be conducted in a case such as New Albany Tractor even though the facts necessary to establish the plaintiffs’ claims were solely within the purview of the defendants.

In contrast, Watson was able to allege specific facts surrounding the agreement among the defendants to drive it out of business, including how it was implemented.  Where Watson obtained this information is not clear, although it may have been from discovery in a prior related litigation that predated Twombly.

Without a doubt, future plaintiffs with similar claims based upon information within the exclusive purview of the defendants, and without the benefit of discovery, face significant challenges in the post-Twombly/Iqbal world.