DM Research, Inc. v. College of American Pathologists

Decision Date04 March 1999
Docket NumberNo. 98-1555,98-1555
Citation1999 WL 104446,170 F.3d 53
Parties1999-1 Trade Cases P 72,469 DM RESEARCH, INC., etc., Plaintiff, Appellant, v. COLLEGE OF AMERICAN PATHOLOGISTS and National Committee for Clinical Laboratory Standards, Defendants, Appellees.
CourtU.S. Court of Appeals — First Circuit

Evan Slavitt with whom Andrew A. Honegger and Gadsby & Hannah LLP were on brief for appellant.

Jack R. Bierig with whom Virginia A. Seitz, Sidley & Austin, Richard A. Licht, Steven M. Richard and Tillinghast, Licht & Semonoff were on brief for appellees.

Before BOUDIN, Circuit Judge, JOHN R. GIBSON, * Senior Circuit Judge, and LYNCH, Circuit Judge.

BOUDIN, Circuit Judge.

DM Research, Inc., the plaintiff in the district court, is a Rhode Island company that for many years has been engaged in the production of reagents, which are substances used in the testing or synthesis of other products. The defendants in the district court were two organizations: the College of American Pathologists ("the College"), a non-profit Illinois corporation comprising several hundred pathologists, and the National Committee for Clinical Laboratory Standards ("National"), a nonprofit Pennsylvania corporation representing a variety of manufacturing, testing, and other interests.

Since the case was resolved below on a motion to dismiss, we take the factual allegations of the complaint as true. See Watterson v. Page, 987 F.2d 1, 3 (1st Cir.1993). Among other products DM Research makes is what its complaint calls "reagent grade water," a form of purified water used in clinical laboratories for various purposes. National's main role is to develop uniform standards relating to clinical laboratory testing; its standards, like those of most private standard-setting organizations, have no legal force but may be followed voluntarily or used in certification arrangements.

In 1991, National adopted a guideline document titled "Preparation and Testing of Reagent Water in the Clinical Laboratory, Approved Guideline" (2d ed. Aug.1991). The guidelines set down minimum requirements reagent water should meet, e.g., as to bacterial content, pH, resistance to electrical transmission, silicate content, particulate content, and organic content. According to the complaint, one of the guidelines effectively requires complying laboratories--at least for certain procedures--to use reagent water produced using a purification system on site, rather than using bottled reagent water manufactured elsewhere. National's guidelines require just-produced water for certain laboratory tests on the ground that the resistivity of the water tends to degrade rapidly over time.

Equipment, apparently costing $1,000 or more, is available for on-site production of reagent water. Laboratories that choose to comply with the National guideline at issue now purchase such equipment instead of buying reagent water from DM Research or its competitors. In DM Research's view, National's requirement of on-site production is scientifically unjustified. The details of this scientific quarrel are not important for present purposes; we assume arguendo that DM Research could prove at trial that National's guideline is unnecessary.

Although the National reagent water guidelines have no legal force, the College has incorporated them into its own guidelines, which it uses in accrediting laboratories, including hospital laboratories. According to the DM Research complaint, the loss of such accreditation would, as a practical matter, be "devastating" to a laboratory. And while the complaint is quite obscure on this point, we will assume that DM Research could prove at trial that many of DM Research's potential customers have strong practical reasons for complying with the College's guidelines even though they may have no legal obligation to do so.

The complaint alleges that the effect of the National guidelines and their adoption by the College was to limit the growth in DM Research's sales of its reagent water and ultimately to force the owner of DM Research to sell the company at reduced price. The complaint charged, inter alia, that National and the College had conspired to restrain trade in the provision of high grade reagent water products, including bottled reagent water and water purification equipment, thereby violating section 1 of the Sherman Act, 15 U.S.C. § 1.

The complaint says that the provision of such products to laboratories constitutes a national "market," within the meaning of the antitrust laws, and solely for purposes of our decision we will assume this to be so. It also says that the acts in furtherance of the conspiracy were as follows:

(a) the creation, adoption, and enforcement of faulty and arbitrary standards and guidelines and (b) economic threats and intimidation of certain laboratories and referring pathologists to cease or refrain from doing business with DM Research and other bottled reagent water manufacturers.

What weight is to be given to allegations of this character, and to the general charge of "conspiracy," is the central issue in this case.

The College moved to dismiss, Fed.R.Civ.P. 12(b)(6), on the ground that the complaint failed to state a claim under the Sherman Act; National moved to dismiss for this reason and for lack of personal jurisdiction and venue. DM filed an opposition but no affidavits. In a thoughtful memorandum and order, dated April 14, 1998, the district judge granted the motion to dismiss the Sherman Act count for failure to state a claim and, declining to exercise supplemental jurisdiction, see 28 U.S.C. § 1367, dismissed without prejudice the remaining state law claims (state antitrust, tortious interference, and defamation). See DM Research, Inc. v. College of American Pathologists, 2 F.Supp.2d 226 (D.R.I.1998).

On DM Research's appeal, our review of the district court's decision is de novo. See Preferred Mutual Ins. Co. v. Travelers Cos., 127 F.3d 136, 137 (1st Cir.1997). The issue is whether the complaint states a claim under the Sherman Act, assuming the factual allegations to be true and indulging to a reasonable degree a plaintiff who has not yet had an opportunity to conduct discovery. See Watterson, 987 F.2d at 3. The issue turns as much on a recurring problem of civil procedure--what force is to be accorded conclusory terms in a complaint--as it does on antitrust analysis.

The governing precept, to borrow the district court's excellent summary, is that while the plaintiff's "facts" must be accepted as alleged, this does not automatically extend to "[b]ald assertions, subjective characterizations and legal conclusions," 2 F.Supp.2d at 228 (citing cases); further, as the district judge said, "the factual allegations must be specific enough to justify 'drag[ging] a defendant past the pleading threshold,' " id. at 228 (quoting Gooley v. Mobil Oil Corp., 851 F.2d 513, 514 (1st Cir.1988)).

Gooley 's concept of "the pleading threshold" is critical. The complaint should include "a short and plain statement" of the claim showing that the pleader is entitled to relief, Fed.R.Civ.P. 8(a), so it need not include evidentiary detail. On the other hand, the price of entry, even to discovery, is for the plaintiff to allege a factual predicate concrete enough to warrant further proceedings, which may be costly and burdensome. Conclusory allegations in a complaint, if they stand alone, are a danger sign that the plaintiff is engaged in a fishing expedition.

In framing its Sherman Act claim, DM Research chose to treat National and the College as independent actors who "conspired" with each other to adopt and implement a scientifically unjustified restriction that foreclosed to DM Research a substantial body of customers. Conspiracy in antitrust parlance is pretty much a synonym for agreement, see, e.g., Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 757, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984), and almost any agreement between independent actors that restrains competition is potentially subject to examination for "reasonableness" under section 1, see National Soc'y of Professional Eng's v. United States, 435 U.S 679, 686-91, 98 S.Ct. 1355, 55 L.Ed.2d 637 (1978). There are exceptions, see, e.g., NAACP v. Claiborne Hardware Co., 458 U.S. 886, 102 S.Ct. 3409, 73 L.Ed.2d 1215 (1982); Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 81 S.Ct. 523, 5 L.Ed.2d 464 (1961), but none is apt here.

Whether an agreement is "unreasonable" from an antitrust standpoint is a complicated matter--much of antitrust law is devoted to it--apart from a few agreements regarded as "per se" unlawful (such as price-fixing agreements between competitors). See U.S. Healthcare, Inc. v. Healthsource, Inc., 986 F.2d 589, 593 (1st Cir.1993). Let us suppose National and the College could not lawfully "agree" on the adoption of a faulty standard that excluded DM Research from access to important customers. Literally read, the complaint does allege such a conspiracy, albeit in conclusory terms.

But no antitrust lawyer could help but ask almost immediately why National and the College would conspire. It is easy enough to understand why two manufacturers might agree to charge above-market prices; if taken together they have market power, the agreement can increase their profits. See United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 60 S.Ct. 811, 84 L.Ed. 1129 (1940). The complaint here does allege that some National members make or are otherwise interested in the manufacture of water purification equipment. But, without more detail, it is highly implausible to suppose that the College or its members have any reason to "agree" with National to adopt a faulty standard whose main effect would be to raise costs for laboratories that found it cheaper to buy bottled reagent water than to make it on site.

DM Research asserts that the district court was required to accept, for purposes of the motion to dismiss...

To continue reading

Request your trial
203 cases
  • Mincey v. World Savings Bank, Fsb
    • United States
    • U.S. District Court — District of South Carolina
    • August 15, 2008
    ...it stops short of the line between possibility and plausibility of "entitle[ment] to relief." Cf. DM Research, Inc. v. College of Am. Pathologists, 170 F.3d 53, 56 (1st Cir. 1999) ("[T]erms like `conspiracy,' or even `agreement,' are border-line: they might well be sufficient in conjunction......
  • Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 167 L.Ed. 2d 929
    • United States
    • U.S. Supreme Court
    • May 21, 2007
    ...it stops short of the line between possibility and plausibility of "entitle[ment] to relief." Cf. DM Research, Inc. v. College of Am. Pathologists, 170 F.3d 53, 56 (CA1 1999) ("[T]erms like 'conspiracy,' or even 'agreement,' are border-line: they might well be sufficient in conjunction with......
  • Brunson Communications, Inc. v. Arbiron, Inc.
    • United States
    • U.S. District Court — Eastern District of Pennsylvania
    • December 31, 2002
    ...Competition Act of 1980, 15 U.S.C. §§ 3501 3503. See PepsiCo, Inc., 836 F.2d at 175. 5. See, e.g., DM Research, Inc. v. College of Am. Pathologists, 170 F.3d 53, 56 (1st Cir.1999) (affirming Rule 12(b)(6) dismissal where complaint alleged "highly implausible" conspiracy) (aff'd 2 F.Supp.2d ......
  • SD3, LLC v. Black & Decker (U.S.) Inc.
    • United States
    • U.S. Court of Appeals — Fourth Circuit
    • September 15, 2015
    ...bribes, or other improper forms of influence, in addition to a further showing of market foreclosure.” DM Research, Inc. v. Coll. of Am. Pathologists, 170 F.3d 53, 57–58 (1st Cir.1999). In other words, a plaintiff must ordinarily show that the standard-setting activity had a market-closing ......
  • Request a trial to view additional results
31 books & journal articles
  • Forms of Joint Conduct and Collaboration
    • United States
    • ABA Antitrust Library Proof of Conspiracy Under Federal Antitrust Laws. Second Edition
    • December 8, 2018
    ...Coalition for ICANN Transparency, Inc. v. VeriSign, Inc., 611 F.3d 495, 506 (9th Cir. 2010); DM Research v. Coll. of Am. Pathologists, 170 F.3d 53, 57 -58 (1st Cir. 1999); and Clamp -All Corp. v. Cast Iron Soil Pipe Inst., 851 F.2d 478, 488 (1st Cir. 1988), cert. denied , 136 S. Ct. 2485 (2......
  • Horizontal Restraints
    • United States
    • ABA Antitrust Library Handbook on Antitrust in Technology Industries
    • December 5, 2017
    ...dismissal of complaint alleging that Verisign had coerced ICANN to grant it control of market); DM Research v. Coll. of Am. Pathologists, 170 F.3d 53, 57-58 (1st Cir. 1999) (“[P]rincipal concern has been the use of standards setting as a predatory device by some competitors to injure others......
  • Initial Pleading
    • United States
    • ABA Antitrust Library Proof of Conspiracy Under Federal Antitrust Laws. Second Edition
    • December 8, 2018
    ...the factually suggestive. Each must be crossed to enter the realm of plausible liability.”); DM Research v. College of Am. Pathologists, 170 F.3d 53, 56 (1st Cir. 1999) (“[T]erms like ‘conspiracy,’ or even ‘agreement,’ are border-line: they might well be sufficient in conjunction with a mor......
  • Basic Antitrust Concepts and Principles
    • United States
    • ABA Antitrust Library Antitrust Health Care Handbook, Fourth Edition
    • February 1, 2010
    ...of a joint venture represent collaboration of the separate entities that own or control it”). DM Research v. Coll. of Am. Pathologists, 170 F.3d 53, 57 (1st 1999) (noting that “the policy reasons” underlying Copperweld “may not apply with the same force, in all circumstances, to a trade or ......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT