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Music Labels Can’t Convince Supremes To Sing Stop In The Name Of Twombly

Posted  February 1, 2011

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.

Tagged in: Antitrust Litigation, Price Fixing,