Appeal from the United States District Court for the Eastern District of Pennsylvania (No. 07-4753) District Court Judge: Honorable Thomas N. O'Neill, Jr.
The opinion of the court was delivered by: Garth, Circuit Judge
Before: AMBRO, GARTH and ROTH, Circuit Judges.
This appeal arises out of the District Court's dismissal of a putative class action brought by Plaintiff-Appellants Stacie Byers and Deborah A. Seltzer against Intuit, Inc., H&R Block Digital Tax Solutions LLC, Free File Alliance, LLC, and the Internal Revenue Service. We will affirm.
In 1998, Congress passed the Internal Revenue Service Restructuring and Reform Act, Pub. L. No. 105-206, Title II, 112 Stat. 723 (1998) ("RRA"). The RRA states, in pertinent part, that "[i]t is the policy of Congress that paperless filing should be the preferred and most convenient means of filing Federal tax and information returns," and consequently that "it should be the goal of the Internal Revenue Service to have at least 80 percent of all such returns filed electronically by the year 2007." Id. at § 2001(a).
Rather than ordering the IRS to develop its own internal electronic filing system in order to achieve this goal, Congress mandated that the IRS "should cooperate with and encourage the private sector by encouraging competition to increase electronic filing of such returns," id., and to "establish a plan to eliminate barriers, provide incentives, and use competitive market forces to increase electronic filing gradually over the next 10 years...." Id. at § 2001(b).
In response, the IRS initiated the Free File Program, pursuant to which it entered into an agreement in October 2002 ("2002 Agreement") with Free File Alliance, LLC ("FFA"), a consortium of companies in the electronic tax preparation and filing industry. The 2002 Agreement provided that the individual companies comprising FFA would offer free electronic filing ("e-filing") services to at least 60% of taxpayers, but it did not set an upper limit as to the percentage of taxpayers who could be offered free e-filing services.
The 2002 Agreement expired after three years, and in 2005 the IRS and FFA entered into a new agreement ("2005 Agreement") wherein they agreed to extend the provisions of the initial agreement, subject to certain amendments. For example, in contrast to the 2002 Agreement, the 2005 Agreement limited the percentage of taxpayers eligible to receive free e-filing services from FFA to the 70% of taxpaying population with the lowest adjusted gross income. In addition, the 2005 Agreement imposed a cap on the amount of free e-filing services available from any individual FFA member at 50% of all taxpayers. These provisions (referred to hereinafter as the "Ceiling Provisions") were inserted by the IRS in order to ensure the continuing vitality of the Free File Program, which the IRS feared might otherwise cause many e-filing vendors to go out of business, thereby frustrating the program's ultimate goals. See Transcript of Oral Argument at 21-22, Byers v. Intuit, Inc., No. 09-1997 (3d Cir. Nov. 17, 2009).
In November 2007, Stacie Byers initiated a putative class action on behalf of U.S. taxpayers against FFA and its members (collectively referred to hereinafter as the "FFA Members"), alleging that in charging fees in exchange for providing e-filing services, the FFA Members violated the Independent Offices Appropriations Act, 31 U.S.C. § 9701 ("IOAA").*fn1 Byers subsequently filed a first amended complaint that (1) added named plaintiff Deborah Seltzer, (2) added the IRS as a defendant with respect to the IOAA claim, and (3) added a claim under Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, against the FFA Members, alleging that the 2005 Agreement constituted an illegal horizontal agreement amongst the FFA Members to restrict output, which had the effect of causing plaintiffs and the members of the proposed class to pay "supracompetitive prices" for e-filing and related services.
On May 28, 2008, the District Court issued a memorandum and order dismissing the IOAA claim with prejudice pursuant to Fed. R. Civ. P. 12(b)(6),*fn2 and dismissing the Sherman Act claim with leave to amend. With respect to the IOAA claim, the District Court held that: (1) the IOAA does not apply to the FFA Members, since it only applies to a government agency or a private entity tasked with performing an agency's statutory duty; and (2) the IOAA does not provide a private right of action.*fn3
With respect to the Sherman Act claim, the District Court held that although the Ceiling Provisions of the 2005 Agreement do have the effect of restricting competition between the FFA Members in violation of the Sherman Act, the FFA Members are entitled to conduct-based implied antitrust immunity and are therefore shielded from antitrust liability, since their anticompetitive behavior was required by the IRS pursuant to the 2005 Agreement.
In so holding, however, the District Court noted that it may be possible for Byers*fn4 to allege facts triggering the exception to conduct-based implied antitrust immunity articulated by the Supreme Court in Otter Tail Power Co. v. United States, 410 U.S. 366, 378-79 (1973), and thereby reinstate the viability of Byers' Sherman Act claim against the FFA Members. As such, the District Court dismissed Byers' Sherman Act claim with leave to amend.
Byers filed a second amended complaint, which contained all of the allegations present in her first amended complaint as well as several paragraphs intended to invoke the Otter Tail exception mentioned by the District Court. Nevertheless, on March 18, 2009, the District Court issued an order dismissing Byers' Sherman Act claim with prejudice pursuant to Rule 12(b)(6), holding that Byers had failed to assert sufficient allegations to invoke the Otter Tail exception, and therefore that her Sherman Act claim fails due to the conduct-based implied antitrust immunity shielding the FFA Members. On the following day, March 19, 2009, the District Court issued an order dismissing Byers' IOAA claim against the IRS for the same reasons that it dismissed her IOAA claim against the FFA Members.
Byers timely appealed the District Court's dismissal of her IOAA claims against the FFA Members and the IRS, as well as the District Court's dismissal of her Sherman Act claim against the FFA Members.*fn5
"Our standard of review of the District Court's dismissal under Rule 12(b)(6) is plenary." Lora-Pena v. F.B.I., 529 F.3d 503, 505 (3d Cir. 2008). We "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Grammar v. John J. Kane Reg'l Ctrs.-- Glen Hazel, 570 F.3d 520, 523 (3d Cir. 2009). In addition,
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level.
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations, quotation marks ...