restraint on trade

In 1984 the divestiture of AT&T's local telephone business created seven regional service monopolies known as Regional Bell Operating Companies or Incumbent Local Exchange Carriers. More than a decade later Congress enacted the Telecommunications Act of 1996 which restructured local telephone markets and imposed duties on the ILECs to facilitate entry by competitive local exchange carriers through resale of services at wholesale rates, leasing of unbundled network elements, or interconnection of facilities. William Twombly and Lawrence Marcus filed suit in the United States District Court for the Southern District of New York on behalf of a putative class of all subscribers of local telephone and high-speed internet services from February 8, 1996 to the present. They named as defendants four consolidated ILECs: BellSouth Corporation, Qwest Communications International Inc., SBC Communications Inc., and Verizon Communications Inc. The complaint alleged that these ILECs conspired to restrain trade by engaging in parallel conduct to inhibit CLECs, including unfair agreements for network access, inferior connections, overcharging, and billing practices designed to sabotage CLEC customer relations. The complaint further alleged that the ILECs agreed not to compete against one another in their respective territories. This agreement was inferred from their common failure to pursue business opportunities in contiguous markets and from a statement by Qwest CEO Richard Notebaert that competing in another ILEC's territory might be a good way to turn a quick dollar but that does not make it right. The complaint asserted that in light of the absence of meaningful competition among the ILECs and their parallel course of conduct the defendants had entered into a contract combination or conspiracy to prevent competitive entry and to allocate customers and markets. The district court dismissed the complaint for failure to state a claim. It concluded that the alleged parallel behavior was fully explained by each ILEC's independent interest in defending its own territory and that the complaint did not allege facts suggesting the decision to refrain from competing elsewhere was contrary to the ILECs' apparent economic interests. The Court of Appeals for the Second Circuit reversed, holding that plus factors need not be pleaded and that allegations of parallel conduct suffice if they leave open the possibility of collusion. The Supreme Court granted certiorari to address the proper standard for pleading an antitrust conspiracy through allegations of parallel conduct.

In 1971 petitioners, husband and wife, contracted to buy a home in Fairfax County, Virginia. The financing agency required them to secure title insurance, which in turn required a title examination that only a member of the Virginia State Bar could legally perform. Petitioners contacted a lawyer who quoted them the precise fee suggested in a minimum-fee schedule published by respondent Fairfax County Bar Association, amounting to one percent of the value of the property. They then sent letters to thirty-six other Fairfax County lawyers requesting their fees for the title examination. Nineteen replied, and none indicated that he would charge less than the rate fixed by the schedule. The fee schedule is a list of recommended minimum prices for common legal services. The County Bar is a purely voluntary association of attorneys with no formal power to enforce the schedule. Respondent Virginia State Bar is the administrative agency through which the Virginia Supreme Court regulates the practice of law, and membership is required to practice in the state. The State Bar published reports condoning fee schedules. It issued ethical opinions indicating that evidence an attorney habitually charges less than the suggested minimum fee schedule adopted by his local bar association raises a presumption that such lawyer is guilty of misconduct. Because petitioners could not find a lawyer willing to charge a fee lower than the schedule dictated, they had their title examined by the lawyer they had first contacted. They then brought this class action against the State Bar and the County Bar alleging that the operation of the minimum-fee schedule as applied to fees for legal services relating to residential real estate transactions constitutes price fixing in violation of section 1 of the Sherman Act. After a trial solely on the issue of liability the district court held that the minimum-fee schedule violated the Sherman Act as to the County Bar but exempted the State Bar. The court of appeals reversed as to liability. The Supreme Court granted certiorari.

Fox West Coast Theatres, Inc. operated a movie theatre in San Bernardino, California and exhibited films under contracts with distributors granting exclusive first-run rights and clearance periods during which no other theatre could show the same pictures. Beacon Theatres, Inc. built a drive-in theatre about 11 miles away and notified Fox that it considered the clearance provisions to be violations of the antitrust laws, threatening treble damage suits against Fox and its distributors. Fox filed a complaint for declaratory relief in the United States District Court for the Southern District of California alleging a controversy under the Sherman Antitrust Act and Clayton Act. The complaint sought a declaration that the clearances were reasonable and not in violation of the antitrust laws together with an injunction preventing Beacon from instituting any antitrust actions against Fox and its distributors arising out of the controversy. Beacon filed an answer denying the threats, a counterclaim against Fox, and a cross-claim against an intervening exhibitor. These pleadings asserted that there was no substantial competition between the theatres, that the clearances were unreasonable, and that a conspiracy existed between Fox and distributors to manipulate contracts so as to restrain trade and monopolize first-run pictures. They sought treble damages. Beacon demanded a jury trial of the factual issues under Federal Rule of Civil Procedure 38(b). The district court directed that the issues raised by Fox's complaint, including the question of competition between the theatres, be tried to the court first under Rules 42(b) and 57 before any jury determination of the antitrust violation charges in the counterclaim and cross-claim. The Court of Appeals for the Ninth Circuit denied Beacon's petition for mandamus to vacate the district court's orders, holding that the trial judge had acted within his discretion. The Supreme Court granted certiorari.

Respondents Glen Theatre, Inc. and Kitty Kat Lounge, Inc. operate establishments in South Bend, Indiana, that provide adult entertainment including live performances by nude or seminude dancers viewed through glass panels or on stage. Darlene Miller worked at the Kitty Kat Lounge on commission and sought to dance totally nude to increase her earnings. Gayle Ann Marie Sutro performed at Glen Theatre after a professional career in dancing and modeling. In 1985 the city enacted an ordinance banning public nudity, defined as the showing of genitals, pubic area, buttocks, or female nipples with less than full opaque covering, which required dancers to wear pasties and G-strings. Respondents filed suit in the United States District Court for the Northern District of Indiana alleging that the ordinance violated the First Amendment by prohibiting totally nude dancing. The District Court originally granted respondents' prayer for an injunction, finding that the statute was facially overbroad. On remand after the Seventh Circuit's initial reversal, the District Court concluded that the type of dancing these plaintiffs wish to perform is not expressive activity protected by the Constitution of the United States. It rendered judgment in favor of the defendants. The case was again appealed to the Seventh Circuit, and a panel of that court reversed the District Court, holding that the nude dancing involved here was expressive conduct protected by the First Amendment. The Supreme Court granted certiorari to resolve a conflict among the Courts of Appeals on the question whether nude dancing is expressive conduct protected by the First Amendment.