Rejecting claims of a horizontal price-fixing conspiracy, the U.S. Court of Appeals for the First Circuit has affirmed summary judgment against a class of Martha’s Vineyard residents suing gas station owners on the picturesque, emphatically low-key island that is best known as a summer colony.

The appeals court held that the plaintiffs in White v. R.M. Packer Co., Inc., failed to raise any fact question as to whether this was a case of an “agreement,” tacit or otherwise, to raise prices, or just permissible conscious parallelism.

The straightforward facts of the case could be lifted from a primer on antitrust law.   Like many other things, gas prices are high on the Vineyard – more than 56 cents per gallon higher than on Cape Cod, of which only 21 cents is attributable to higher transport costs.

Competition is also sharply limited.  There are only nine gas stations on the island, which has some 75,000 residents in the summer.  This is plenty, according to the Martha’s Vineyard Commission:  the commission hasn’t approved a permit for a new station in decades.  Gas is highly fungible, and stations post their prices for all – customers and rivals alike – to see.

Did the owners ever need to reach an “agreement” to raise prices?  While the case was “not economically implausible,” the court found the Vineyard market was “particularly conducive” to the maintenance of consciously parallel prices.  Plaintiffs failed to muster evidence that, in the words of the Supreme Court’s Monsanto decision, “tends to exclude the possibility of independent action.”  And the evidence plaintiffs did have – such as one owner, also a wholesaler, saying that if another station started “mucking around with prices one or two delivery trucks a week might not make it on the boat and they’ll get the idea real quick” – was dismissed as mere pressure from the wholesaler to his retail customer, not evidence of collusion. 

Plaintiffs’ other evidence of “plus factors” simply tended to confirm what most Vineyard residents know but put up with along with the other charms of island living:  the island’s gasoline market is oligopolistic and highly conducive to parallel pricing.  Plaintiffs failed, the court found, to explain how this pricing was a function of agreement rather than independent (or interdependent) decisions by station owners.

The four major U.S. music labels have lost their bid to convince the Supreme Court to pull the plug on an antitrust class action under the high court’s Twombly standard for pleading.

The Supreme Court has declined to hear an appeal in Sony Music Entertainment v. Kevin Starr, a price-fixing class action against Warner Music Group, Universal Music Group, Sony, and EMI.  The denial of certiorari leaves standing the decision of the U.S. Court of Appeals for the Second Circuit to let the case proceed to discovery.

This case provides yet another test of the bounds of the Supreme Court’s Twombly standard, which federal courts have struggled to flesh out in their rulings on motions to dismiss antitrust complaints. 

The case arose from the major labels’ early ventures into Internet music, through services called MusicNet and pressplay.  Plaintiffs alleged that these ventures “provided a forum and means through which defendants could communicate about pricing, terms, and use restrictions.”  Plaintiffs also claimed that MusicNet and pressplay charged unreasonably high prices, burdened users with unpopular DRM software, and failed to account for increasingly lower costs in the digitization of music.

The district court dismissed the complaint under the Twombly standard, which requires that complaints state enough facts to “plausibly suggest” a violation of antitrust law.  The Second Circuit reversed in January 2010.  The appeals court reasoned that alleged behavior by the labels – including setting high prices for music and imposing restrictive digital rights management – would not have been in the labels’ self-interest unless their competitors did the same, and this plausibly suggested an illegal agreement.

The Supreme Court’s denial of review means that the case will proceed to discovery and potentially trial, though any trial is unlikely to take place before late 2011.

Proponents of proving antitrust conspiracies with circumstantial evidence are one for two in Seventh Circuit decisions decided in the last two weeks with the plaintiff’s summary judgment loss in Omnicare Inc. v. UnitedHealth Group, Inc.

The decision by the U.S. Court of Appeals for the Seventh Circuit affirming Judge Rebecca Pallmeyer’s grant of summary judgment to the defendants in Omnicare is that court’s second antitrust opinion in as many weeks that pivots on circumstantial evidence.  As discussed in a previous post, the Seventh Circuit found allegations of a price-fixing conspiracy – based on circumstantial evidence – sufficient to withstand a motion to dismiss at the pleading stage two weeks ago in In re: Text Messaging Antitrust Litigation.

This week, however, the Seventh Circuit affirmed the district court’s ruling that the circumstantial evidence submitted by OmniCare Inc., an institutional pharmacy, failed to raise any issue of material fact as to whether defendants UnitedHealth Group Inc. and PacifiCare Health Systems Inc. conspired to depress Omnicare’s reimbursement rates.  Omnicare charged that United and Pacific conspired to depress these rates after they entered into a merger agreement, but before the merger was consummated.

OmniCare sued in 2006 when UnitedHealth, after the merger, scrapped its reimbursement rate contract with the pharmacy company for the more favorable agreement PacifiCare had entered into with Omnicare before the merger.

In appealing the district court’s grant of summary judgment for the defendants, Omnicare set forth what the Seventh Circuit called a “richly detailed narrative” that was both “complex and compelling.”  Yet the appeals court stated that “Omnicare cannot get to trial based on the elegance of its theory alone.”

Citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986) and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554 (2007), the Seventh Circuit held that the only evidence presented by Omnicare was “circumstantial,” rather than “direct.”  Accordingly, the Seventh Circuit held that, to survive summary judgment, Omnicare had to “show that the inference of conspiracy is reasonable in light of the competing inferences of independent action or collusive action that could not have harmed it,” and that Omnicare’s “offer of conspiracy evidence must tend to rule out the possibility that the defendants were acting independently.”

The court specifically held that pricing and strategy information exchanged between the parties in the context of their merger negotiations did “not tend to exclude the possibility that United and PacifiCare were acting to advance their own legitimate interests,” as opposed to illegally colluding.  Further, the court concluded that “the ample evidence offered by Omnicare does not on the whole tend to negate the reasonable inference of independent action.”

It is interesting that just two weeks ago, in In re: Text Messaging Antitrust Litigation, the Seventh Circuit rejected defendants’ argument that circumstantial evidence was insufficient to support allegations of a price-fixing conspiracy, noting the court did not need to “decide whether the circumstantial evidence that we have summarized is sufficient to compel an inference of conspiracy; the case is just at the complaint stage and the test for whether to dismiss a case at that stage turns on the complaint’s ‘plausibility.’”

While the two opinions could be read together as simply reflecting the higher burden imposed on plaintiffs at the summary judgment stage – when they need to come up with evidence to back up the well-pleaded allegations that defeated any motion to dismiss – the opinions could also signal that the Seventh Circuit may be taking a more jaundiced view of circumstantial evidence in general once parties get past the pleading stage.

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.

The U.S. Court of Appeals for the Second Circuit has affirmed a lower court’s ruling that Priceline.com, Inc. did not fit the definition of a class member described in a $336 million antitrust class action settlement agreement that resolves claims of price fixing in the consumer payment card industry.

The plaintiffs in the In re Currency Conversion Fee Antitrust Litigation alleged a price-fixing conspiracy among Visa, MasterCard, Citicorp Diners Club, Inc., and a number of banks.  The class consisted of credit card holders who claimed that the defendants conspired to fix the price of foreign currency conversion fees paid by the class while traveling internationally. 

The class and the defendants reached settlement in July 2006, but the district court held that Priceline, along with travel websites Travelocity and Orbitz, could not participate in the class settlement because their customers, not the companies themselves, paid the transaction fees at issue.

Although subsequent disclosures revealed that Priceline did not in fact pass along the fees to its customers, the Second Circuit affirmed the district court’s ruling, holding that Priceline could not reasonably be considered a “card holder” under any definition of the term, noting that “Priceline’s relationship with the credit card companies evinces a more complicated relationship than that of other members of the class in this matter.”