On October 18, the Second Circuit Court of Appeals issued an affirmance in Vedder Software Group v. Insurance Services Office, ruling that District Court Judge Glenn Suddaby (N.D. N.Y.) had properly dismissed plaintiff’s antitrust claims against Insurance Services Office (“ISO”) and Liberty Mutual Insurance for failure to state a claim.

Vedder’s claim centered upon the contention that ISO had engaged in anticompetitive conduct designed to enhance the success of ISO’s loss estimating software, called Xactware, and the failure of Vedder’s competing product, the Estimating Wizard. Specifically, Vedder claimed that ISO had conspired with several p&c insurers, including but not limited to Liberty Mutual (which was the only other named defendant), to require that the insurers’ vendors utilize Xactware, and to refrain from using the Estimating Wizard.

In assessing Vedder’s antitrust claim, the Second Circuit noted that the plaintiff had not alleged an express agreement among the insurers to utilize Xactware, and instead relied on the insurers’ parallel conduct (i.e., the use of Xactware) in support of its conspiracy claim. Thus, to state a claim, Vedder was required to allege “plus factors” that would “tend to exclude the possibility of independent action,” or fail to meet their pleading obligations under the Supreme Court’s Twombly decision. The Court noted, however, that the only plus factors alleged by Vedder were that (1) the insurers held an ownership interest in Xactware’s parent company, and (2) that the insurers had allegedly insisted on the use of Xactware by their vendors.

In affirming the lower court’s dismissal of Vedder’s complaint, the Court held that the ownership interest in Xactware’s parent company held by several insurers, standing alone, was insufficient, to state a conspiracy claim. In addition, Vedder’s allegation that the insurers had insisted that their vendors use Xactware was also insufficient to meet its pleading obligations, because the insurers may have demanded their vendors use Xactware to ensure consistency in estimates, and not to cause competitive harm to Vedder. Thus, Vedder’s allegations did not “tend to exclude the possibility of independent action,” and suggested only “the mere possibility of misconduct.” Accordingly, the complaint was properly dismissed.