2 F.4th 695
7th Cir.2021Background
- Plaintiffs are local tow/recycling businesses who buy and sell scrap cars; they sued the City of Milwaukee and Miller Compressing alleging an anticompetitive, long‑term exclusive deal diverted abandoned vehicles to Miller and disadvantaged private recyclers.
- The operative allegation centers on a 2003 City–Miller contract (renewed through 2023) that (1) committed the City to sell large percentages of abandoned vehicles to Miller, (2) set pricing and payment for Miller’s removal/processing services, and (3) covered multiyear durations; plaintiffs attached an unexecuted copy to the complaint.
- Plaintiffs also alleged the City enacted and enforced towing/licensing rules and denied or failed to renew licenses for some private tow firms, which they claim reinforced the exclusive arrangement.
- The district court dismissed all federal claims under Rule 12(b)(6), concluding plaintiffs failed to plausibly plead a §1 Sherman Act agreement/unreasonable restraint under Twombly/Iqbal, and dismissed with prejudice as amendment would be futile.
- On appeal, plaintiffs argued the 2003 contract itself is direct evidence of an unlawful agreement (per se §1 violations such as horizontal price fixing or bid rigging); the Seventh Circuit affirmed, finding the contract a vertical arrangement not per se illegal and plaintiffs had waived rule‑of‑reason alternatives.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 2003 City–Miller contract is a §1 per se unlawful agreement (horizontal price fixing) | The contract directly fixed allocation/price of scrap vehicles and thus is per se illegal | The contract is between a municipal seller and a buyer/processor (vertical relationship), not horizontal competitors | Not per se unlawful; the contract is a vertical restraint and does not trigger per se treatment |
| Whether the City–Miller deal amounts to bid rigging (circumventing J‑BID) | City and Miller rigged/evaded the public J‑BID auction to allocate vehicles to Miller | City sells vehicles; Miller buys them — defendants are not horizontal bidders; allegations at most show interference with bidding, not bid rotation | Not bid rigging as pleaded; no civil precedent supports broad definition alleged; not per se unlawful |
| Whether plaintiffs can invoke rule of reason/quick look to show an unreasonable restraint | The contract harms competition and market—rule of reason should apply to show unreasonableness | Plaintiffs failed to develop or brief a rule‑of‑reason theory on appeal | Plaintiffs waived rule‑of‑reason/other non‑per‑se arguments by not developing them; cannot rely on them to save the claim |
| Whether dismissal with prejudice and denial of further amendment was appropriate | Plaintiffs sought leave to amend | Defendants argued prior amendment opportunity and futility | Dismissal with prejudice affirmed: plaintiffs had already amended and further amendment would be futile |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (Sup. Ct. 2007) (pleading standard for alleging concerted agreement)
- Ashcroft v. Iqbal, 556 U.S. 662 (Sup. Ct. 2009) (applies Twombly pleading rules to factual allegations)
- NCAA v. Bd. of Regents of Univ. of Okla., 468 U.S. 85 (Sup. Ct. 1984) (only unreasonable restraints of trade are prohibited)
- Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (Sup. Ct. 2007) (vertical price restraints are judged under rule of reason)
- Tri‑Gen, Inc. v. Int’l Union of Operating Eng’rs, Loc. 150, 433 F.3d 1024 (7th Cir. 2006) (per se vs. rule of reason discussion)
- Republic Tobacco Co. v. N. Atl. Trading Co., 381 F.3d 717 (7th Cir. 2004) (vertical exclusive distributorships presumptively legal)
- Agnew v. NCAA, 683 F.3d 328 (7th Cir. 2012) (antitrust injury and pleading standards)
- United States v. Fenzl, 670 F.3d 778 (7th Cir. 2012) (bid rigging as form of price fixing)
- Heffernan, 43 F.3d 1144 (7th Cir. 1994) (limits on broad definitions of bid rigging in criminal context)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (Sup. Ct. 1986) (circumstantial evidence must tend to exclude independent action)