On May 14, 2010, in American Dental Association v. Cigna Corp, the U.S. Court of Appeals for the Eleventh Circuit affirmed the district court’s dismissal of the Plaintiff’s complaint for failing to meet the pleading standard under Federal Rule of Civil Procedure 9(b) and the pleading standard recently articulated by the Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 127 S. Ct. 1955 (2007) and Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937 (2009).

The plaintiffs are three dentists and the American Dental Association which asserted representational standing on behalf of its members. The defendants are dental insurance companies which, among other things, participate in trade associations. The plaintiffs contracted with the defendants to provide dental services to the defendants’ members through managed care plans. The plaintiffs alleged, as a class action, that the defendants violated and conspired to violate the Racketeer Influenced and Corrupt Organizations Act by “engag[ing] in a systematic, fraudulent scheme to diminish payments to Class Plaintiffs through automatic downcoding, Current Dental Terminology (CDT) code manipulation and improper bundling.”

In order to meet the standards articulated in Twombly and Iqbal, the Court noted that the plaintiffs needed “to plausibly and particularly allege facts showing related instances of mail and wire fraud, but also plausibly allege facts showing that a conspiracy created the alleged scheme.” Finding that it could not “infer a scheme-driven deception from a complaint that provides no details of fraud or conspiracy,” the Court affirmed the dismissal of the substantive RICO claim. The Court similarly affirmed the dismissal of the conspiracy claim because the allegations against the defendants, including but not limited to the defendants’ participation in trade associations, were “equally indicative of rational independent action as it is concerted, illegitimate conduct.”

In rounding out its discussion of the Plaintiff’s ill-fated claims, the Court reaffirmed that a trade association “is not by its nature a ‘walking conspiracy'” and that participation in trade associations “provides no evidence of conspiracy.” The Court’s mention of the “not-a-walking-conspiracy” maxim is a reminder of the care trade associations must take to keep their operations antitrust-pure. There is a high premium in association management on making sure the association looks like what a court expects a law-abiding association to look like. Modern courts are increasingly willing to rule in favor of trade associations in antitrust cases, but a current of anti-competitiveness — particularly in email traffic — can influence a court in the other direction.