AAI Asks Ninth Circuit to Open Courthouse Doors to Antitrust Conspiracy Victims (Frost v. LG Electronics)

AAI has filed an amicus brief in the Ninth Circuit asking the entire court to reconsider its onerous standard for pleading antitrust conspiracies.

In Frost v. LG electronics, two former LG employees allege that, beginning in 2005, Samsung and LG entered a naked, horizontal agreement not to hire one another’s employees—a so-called “no-poaching” agreement. The plaintiffs’ complaint included allegations that a recruiter working on behalf of Samsung emailed one of the plaintiffs that “the two companies have an agreement that they won’t steal each other’s employees” and that high-ranking executives of one of the companies admitted to the agreement in a published article.

In July of 2018, without any merits discovery, the district court dismissed the complaint, finding that it failed to allege sufficient detail about “who, did what, to whom (or with whom), where, and when” and that the conspiracy it alleged was not plausible because it relied on allegations requiring inferences.

On appeal, in a bare, unpublished opinion, a divided panel affirmed the dismissal. One judge concurred separately to explain that, though he felt bound to follow precedent, he disagrees with the Ninth Circuit’s standard for pleading antitrust conspiracies.  A second judge dissented, stating that, if Ninth Circuit law requires dismissal of this case, then it conflicts with the watershed Supreme Court case Bell Atlantic Corp. v. Twombly.  Plaintiffs have petitioned for the entire court, sitting en banc, to rehear the case.

AAI’s brief in support of the plaintiffs’ petition argues that the Ninth Circuit’s “who-what-when” checklist, established after Twombly but before its companion case, Ashcroft v. Iqbal, imposes a heightened pleading standard for antitrust conspiracies, contrary to the Federal Rules of Civil Procedure and clear Supreme Court precedent. The brief also explains that antitrust conspiracy cases that include independent allegations of an actual agreement, instead of relying solely on parallel conduct and plus factors, can rely on allegations of direct or circumstantial evidence. Accordingly, the Ninth Circuit rule requiring direct evidence of an actual agreement is wrong, unduly restrictive, and prevents investigation and prosecution of cases even where it is alleged that an actual agreement has been detected.

The brief was written by AAI Vice President of Policy Laura Alexander and AAI Vice President of Legal Advocacy Randy Stutz.