                  FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

WILLIAM O. GILLEY ENTERPRISES,          
INC., a Nevada corporation doing
business in California and the
estate of William O. Gilley,
deceased; DENNIS DECOTA, an
individual; PATRICK PALMER, an
individual on behalf of themselves
and all others similarly situated,
               Plaintiffs-Appellants,
                 v.                          No. 06-56059
ATLANTIC RICHFIELD COMPANY;                   D.C. No.
                                            CV-98-0132-BTM
CHEVRON CORPORATION; EXXON
CORPORATION; MOBIL OIL                         OPINION
CORPORATION; EXXON/MOBIL
CORPORATION; SHELL OIL COMPANY;
TEXACO INC.; TOSCO CORPORATION;
ULTRAMAR DIAMOND SHAMROCK;
VALERO CORPORATION; CONOCO-
PHILIPS PETROLEUM CORPORATION;
CHEVRON/TEXACO CORPORATION;
TESORO CORPORATION,
              Defendants-Appellees.
                                        
       Appeal from the United States District Court
           for the Southern District of California
       Barry T. Moskowitz, District Judge, Presiding

                   Argued and Submitted
          February 13, 2008—Pasadena, California

                     Filed April 3, 2009

                             4013
4014           GILLEY v. ATLANTIC RICHFIELD CO.
       Before: Stephen S. Trott, Richard R. Clifton, and
            Consuelo M. Callahan, Circuit Judges.

                   Opinion by Judge Trott;
                  Dissent by Judge Callahan
4016         GILLEY v. ATLANTIC RICHFIELD CO.




                      COUNSEL

Charles M. Kagay, Spiegel, Liao & Kagay LLP, San Fran-
cisco, California, for the plaintiffs-appellants.
               GILLEY v. ATLANTIC RICHFIELD CO.           4017
Timothy D. Cohelan, Cohelan & Khoury, San Diego, Califor-
nia, for the plaintiffs-appellants.

Hojoon Hwang, Munger, Tolles & Olson LLP, San Francisco,
California, for the defendants-appellees.

Peter H. Mason, Fulbright & Jaworski LLP, Los Angeles,
California, for the defendant-appellee.

David M. Foster, Fulbright & Jaworski LLP, Washington DC,
for the defendant-appellee.


                         OPINION

TROTT, Circuit Judge:

   The district court granted Defendants’ motion to dismiss
Plaintiffs’ antitrust claim founded on § 1 of the Sherman Act,
holding that 1) Aguilar v. Atlantic Richfield Co., 24 P.3d 493
(Cal. 2001), precludes the allegations made in the operative
pleading; 2) Defendants’ exchange agreements can not be
aggregated to establish market power and anticompetitive
effect; and 3) even if the exchange agreements could be
aggregated, the absence of a conspiracy to limit supply and
raise prices eliminates a causal connection between the
exchange agreements and anticompetitive effect. We have
jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse and
remand.

                               I

                      BACKGROUND

  Plaintiff-Appellant William O. Gilley filed this class-action
lawsuit in 1998 on behalf of himself and other wholesale pur-
chasers of CARB gasoline in the state of California. CARB
4018           GILLEY v. ATLANTIC RICHFIELD CO.
gas is a cleaner-burning fuel, and since 1996 it is the only
type of gas that can be sold in California. The complaint
alleged that Defendants-Appellees, major oil producers, vio-
lated § 1 of the Sherman Act by entering into a conspiracy to
limit the supply of CARB gasoline and to raise prices.

   The allegations of the complaint were similar to those
alleged in Aguilar, a class-action suit filed in California Supe-
rior Court in 1996. That suit was brought under the Cart-
wright Act, CAL. BUS. & PROF. CODE § 16720 et seq.,
California’s equivalent to the Sherman Act. Aguilar, 24 P.3d
at 502. The plaintiff in Aguilar was a retail purchaser and con-
sumer of gasoline and sought to represent a class of retail pur-
chasers. The plaintiff in this action was a wholesale purchaser
and retail dealer of gasoline and sought to represent a class of
wholesale purchasers. Both plaintiffs were represented by the
same attorneys, and both actions targeted the same defendants
for essentially the same allegedly unlawful conduct. Because
of the similarity in the cases, the district court hearing this
case stayed the suit pending the outcome of Aguilar.

   In Aguliar, the state superior court granted summary judg-
ment to the defendants, concluding that there was insufficient
evidence presented by the plaintiffs to allow a reasonable
juror to find a conspiracy to limit supply and raise prices
among the several gasoline companies. Id. at 503. The Cali-
fornia Supreme Court affirmed. Id. at 521. As a result, Defen-
dants in this case brought a motion for summary judgment
arguing that Gilley’s claims were barred by collateral estop-
pel. In response, Gilley offered a proposed amended com-
plaint, which the court found insufficient. The district court,
however, granted Gilley leave to provide another proposed
amended complaint, which he did.

  On May 6, 2002, the district court granted Defendants’
motion for summary judgment on that complaint, holding that
Gilley was precluded by Aguilar from relitigating whether a
conspiracy existed to limit supply and raise prices. However,
               GILLEY v. ATLANTIC RICHFIELD CO.            4019
the court granted Gilley further leave to amend the complaint
to allege that “each of the bilateral agreements, entered into
independently between various defendant gasoline companies,
ha[s] anti-competitive effects and therefore violate[s] the
Sherman Act.”

   On May 24, 2002, Gilley filed the third post-Aguilar com-
plaint, alleging that forty-four bilateral exchange agreements
had the effect of unreasonably restraining trade in violation of
§ 1 of the Sherman Act and in violation of CAL. BUS. & PROF.
CODE § 17200. On March 27, 2003, the district court granted
Defendants’ motion to dismiss that complaint with prejudice.
With respect to the § 1 claim, the court explained that Gilley
had not alleged any theory as to how any individual exchange
agreement, which accounts for a small percentage of the rele-
vant market, is able to inflate the price of CARB gasoline.
The district court rejected Gilley’s argument that the court
could consider the aggregate effects of the individual bilateral
agreements to allege an anticompetitive effect—namely
higher gas prices.

   Gilley appealed to this Court, which reversed and
remanded, holding that the district court erred in not giving
Gilley an opportunity to correct the newly identified deficien-
cies. After the remand, the second amended complaint
(“SAC”) was filed. Most of the allegations of anticompetitive
conduct and effect are stated in the following terms:

    [Defendant] entered into the following sales/
    exchange agreements for delivery of CARB gas in
    [geographic market]: [list of exchange agreements.]

    [Defendant’s] intent and purpose in entering into
    these sales/exchange agreements was to limit refin-
    ing capacity for CARB gas and/or to keep CARB
    gas out of the spot market and away from unbranded
    marketers.
4020              GILLEY v. ATLANTIC RICHFIELD CO.
       These agreements have had the effect of raising
       CARB gas prices in [geographic market] above com-
       petitive levels, without any countervailing procom-
       petitive benefit.

   The district court granted Defendants’ motion to dismiss
the SAC, holding that Plaintiffs failed to allege that the
exchange agreements, when considered individually, would
be capable of producing significant anticompetitive effects.
We now review the district court’s summary dismissal of the
SAC.

                                 II

                         DISCUSSION

A.     Standard of Review

  We review de novo a dismissal for failure to state a claim
pursuant to Rule 12(b)(6). Knievel v. ESPN, 393 F.3d 1068,
1072 (9th Cir. 2005). All allegations of material fact are taken
as true and construed in the light most favorable to the non-
moving party. Id.

B.     Analysis

   We address the following issues in this appeal: 1) the pre-
clusive effect of the California Supreme Court’s decision in
Aguilar; 2) the pleading standard for § 1 claims; 3) the suffi-
ciency of Plaintiffs’ SAC; 4) Plaintiffs’ standing to add
Tesoro as a Defendant in the SAC; and 5) the state law claim
under CAL. BUS. & PROF. CODE § 17200.

  1.    The Preclusive Effect of the California Supreme
        Court’s Aguilar Decision.

  Gilley does not dispute that the decision in Aguilar has
some preclusive effect in the current lawsuit, but he contends
               GILLEY v. ATLANTIC RICHFIELD CO.             4021
that his current claim is not entirely extinguished by Aguilar.
In contrast, Defendants argue that all of the allegations in the
SAC are precluded by Aguilar. We conclude that Gilley has
stated a claim that is not precluded by the California Supreme
Court’s decision.

   [1] The critical determination in Aguilar was that the plain-
tiff failed to provide sufficient proof of a fact necessary for
the claim she had pled, specifically that Defendants conspired
and acted collectively through exchange agreements to fix
prices and/or control supply. As the California Supreme Court
explained: “Aguilar had to present evidence that tended to
exclude the possibility that the petroleum companies acted
independently rather than collusively. This she did not do.”
Aguilar, 24 P.3d at 518. In the order granting Defendants’
motion to dismiss, the district court in this case summarized
its understanding of that finding: “With respect to exchange
agreements specifically, the court found that the evidence
showed independent action on the part of the petroleum com-
panies rather than a collusive web of bilateral exchange agree-
ments to control supply and prices.” The district court,
applying the doctrine of issue preclusion (or collateral estop-
pel), accepted as an established fact the finding that the defen-
dants did not collude to control supply and prices through the
exchange agreements.

  The California Supreme Court was clear in Aguilar, how-
ever, that the failure to prove that fact did not necessarily
mean that plaintiff did not have a legally viable claim against
Defendants:

       In alleging facts for her Cartwright Act cause of
    action, Aguilar proceeded on a theory, which was
    legally sound, that the assertedly unlawful conspir-
    acy consisted of an agreement among the petroleum
    companies as competitors to restrict the output of
    CARB gasoline and to raise its price, and was
    unlawful per se without regard to any of its effects.
4022             GILLEY v. ATLANTIC RICHFIELD CO.
      In granting the petroleum companies summary judg-
      ment, the superior court did so on that theory. On
      appeal, Aguilar apparently attempted to introduce an
      alternative theory, which was also legally sound, that
      the assertedly unlawful conspiracy consisted of the
      various exchange agreements entered into by the
      various petroleum companies, and was unlawful
      because of its effects. The Court of Appeal rejected
      any such attempt as too late. To the extent that Agui-
      lar makes the same attempt on review, we reject it
      for the same reason.

Id. at 521, n. 35 (citations omitted). Plaintiff was not allowed
to proceed with the alternative theory based on the effects of
the exchange agreements, without proof of collusion, because
the theory had not been timely pleaded, not because it was
held to be defective, either legally or factually.

   The Aguilar decision does not preclude the latter theory in
subsequent litigation. Issue preclusion is decided under the
law of the state where judgment was entered. Ross v. Alaska,
189 F.3d 1107, 1110 (9th Cir. 1999). Under California law,
issue preclusion applies only if a number of conditions are
satisfied. Calvert v. Huckins, 109 F.3d 636, 638 (9th Cir.
1997). Among those conditions are “[the] issue must have
been actually litigated in the former proceeding” and “the
decision in the former proceeding must be final and on the
merits.” Id.

   [2] Aguilar precludes a claim that depends upon proof of
collusion by Defendants to use exchange agreements to con-
trol supply and prices, notably in the form of a per se claim
of a horizontal price-fixing conspiracy,1 but it does not pre-
  1
    The determination of whether an agreement unreasonably restrains
trade can be based upon per se condemnation or under a rule of reason
analysis. See Texaco Inc. v. Dagher, 547 U.S. 1, 5-7 (2006) (noting that
a per se claim and a rule of reason claim are distinct). Courts will con-
                  GILLEY v. ATLANTIC RICHFIELD CO.                     4023
clude a claim that the bilateral exchange agreements have an
anticompetitive effect on competition, despite the absence of
collusion, under the rule of reason.2

   [3] The SAC may include allegations which are precluded
by Aguilar, but not of all of what the SAC alleges is pre-
cluded. To the extent that the SAC alleges a claim that Defen-
dants have entered into exchange agreements, without a
conspiracy to control supply or to set prices, and that those
agreements aggregated together have an anticompetitive
effect on competition in the relevant market, it has stated a
claim that is not precluded by Aguilar.

  2.    The Pleading Standard for § 1 Claims.

   To successfully state a claim under § 1 of the Sherman Act,
a plaintiff need only meet the notice pleading standard articu-
lated in Fed. R. Civ. P. 8(a)(2). Bell Alt. Corp. v. Twombly,
550 U.S. 544, 127 S. Ct. at 1964 (2007). Rule 8(a)(2) requires
“ ‘a short and plain statement of the claim showing that the
pleader is entitled to relief,’ in order to ‘give the defendant
fair notice of what the . . . claim is and the grounds upon
which it rests.’ ” Id. (quoting Fed. R. Civ. P. 8(a)(2)). “[A]
well-pleaded complaint may proceed even if it strikes a savvy
judge that actual proof of those facts is improbable, and ‘that

demn as per se illegal only those agreements that are “so plainly anticom-
petitive that no elaborate study of the industry is needed to establish their
illegality.” Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 692
(1978). For example, “[p]rice-fixing agreements between two or more
competitors, otherwise known as horizontal price-fixing agreements,” are
condemned as per se illegal. Dagher, 547 U.S. at 5.
   2
     For a rule of reason claim, “the finder of fact must decide whether the
questioned practice imposes an unreasonable restraint on competition, tak-
ing into account a variety of factors, including specific information about
the relevant business, its condition before and after the restraint was
imposed, and the restraint’s history, nature, and effect.” State Oil Co. v.
Khan, 522 U.S. 3, 10 (1997).
4024               GILLEY v. ATLANTIC RICHFIELD CO.
a recovery is very remote and unlikely.’ ” Id. at 1965. Addi-
tionally, dismissals for failure to state a claim are disfavored
in antitrust actions. Hosp. Bldg. Co. v. Trs. of Rex Hosp., 425
U.S. 738, 746 (1976); Clayco Petroleum Corp. v. Occidental
Petroleum Corp., 712 F.2d 404, 406 (9th Cir. 1983).

  3.        The SAC is a Sufficient Pleading.

   [4] Section 1 of the Sherman Act prohibits “[e]very con-
tract, combination in the form of trust or otherwise, or con-
spiracy, in restraint of trade or commerce among the several
States.” 15 U.S.C. § 1. However, it has long been recognized
that Congress did not intend to give literal meaning to those
words, but instead only intended to make unlawful unreason-
able restraints on trade. State Oil Co. v. Khan, 522 U.S. 3, 10
(1997). Therefore, “to establish a claim under § 1 of the Sher-
man Act, the plaintiff must show 1) that there was a contract,
combination, or conspiracy; 2) that . . . unreasonably
restrained trade under either a per se rule of illegality or a rule
of reason analysis; and 3) that the restraint affected interstate
commerce.”3 Bhan, 929 F.2d at 1410.

       a.     The First Element—Existence of an Agreement.

   Under the first element of a § 1 claim, a plaintiff must
plead the existence of a contract, combination, or conspiracy,
meaning a defendant did not operate unilaterally, but instead,
at least two entities acted in concert. Copperweld Corp. v.
Independence Tube Corp., 467 U.S. 752, 768 (1984). Defen-
dants argue that the exchange agreements are not concerted
action.

  [5] “Our antitrust law is clear that [a plaintiff] need not
prove intent to control prices or destroy competition to dem-
onstrate the element of an agreement . . . among two or more
  3
   Neither party disputes that the exchange agreements affect interstate
commerce.
                GILLEY v. ATLANTIC RICHFIELD CO.             4025
entities.” Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d
1145, 1153-54 (9th Cir. 2003) (internal quotation marks omit-
ted) (noting that intent of the parties is to be evaluated under
the second element of the § 1 analysis). The exchange agree-
ments are “contracts.” As a result, each bilateral exchange
agreement, even without intent to control prices, provides an
agreement that meets the first element of a § 1 Sherman Act
claim.

    b.   The Second Element—When Aggregated, the
         Exchange Agreements Unreasonably Restrain
         Trade.

   Under the second element of a § 1 claim, a plaintiff must
show the challenged agreement unreasonably restrains trade
by establishing anticompetitive effects. Bhan, 929 F.2d at
1410. To make this showing under the rule of reason analysis,
a plaintiff generally must establish market power. Adaptive
Power Solutions, LLC v. Hughes Missile Sys. Co., 141 F.3d
947, 951 (9th Cir. 1998). “Market power is the ability to raise
prices above those that would be charged in a competitive
market.” NCAA v. Bd. of Regents, 468 U.S. 85, 109 n.38
(1984).

  Because each of the exchange agreements arguably affects
only a small amount of CARB gas, Plaintiffs pleaded the
cumulative effect of a single Defendant’s exchange agree-
ments to show market power and anticompetitive effect.

   [6] Plaintiffs argue correctly that the district court erred in
not allowing them to allege the cumulative effects of a single
Defendant’s exchange agreements. They find support in Ninth
Circuit and United States Supreme Court precedent, which
has allowed the aggregation of multiple contracts when evalu-
ating the legality of an individual contract. Twin City
Sportservice, Inc. v. Charles O. Finley & Co., 676 F.2d 1291
(9th Cir. 1982); Fortner Enters. v. United States Steel Corp.,
394 U.S. 495 (1969); Standard Oil Co. of Cal. & Standard
4026            GILLEY v. ATLANTIC RICHFIELD CO.
Stations, Inc., v. United States, 337 U.S. 293 (1949); cf. 2
AREEDA & HOVENKAMP ¶ 310c1, p. 201 (“An aggregation of
claims may produce sufficient proof of violation or injury
where violation requires that a certain legal threshold be met
and no claim standing alone is sufficient to meet the thresh-
old.”).

   In Twin City, we were presented with the issue of “whether
a district court, in assessing the antitrust liability of a defen-
dant, may look to the overall effects of a defendant’s conduct
in the relevant market, or is limited to looking at the market
implications of the one contract between the antitrust plaintiff
and defendant.” 676 F.2d at 1302. We allowed aggregation,
reasoning that a defendant who restrains trade by an obvious
pattern and practice of entering into individual contracts
should not be allowed to do piecemeal what he would be pro-
hibited from doing all at once. Id. We held that, “[c]reating
such a distinction would require courts to enforce arguably
innocuous single contracts that belong to a pattern of contrac-
tual relations that significantly restrain trade in a relevant
market.” Id. at 1303.

   [7] The district court and Defendants concede that aggrega-
tion of agreements is appropriate in some cases. Both, how-
ever, contend that aggregation should be allowed only in the
context of “exclusive dealing” and “tying” cases because of
the predictably anticompetitive effect of those practices—
market foreclosure to competitors. The district court reasoned
that only those types of contracts can be aggregated because
they have “a clear purpose and an identifiable effect” and
because “[d]etermining the cumulative effect of such con-
tracts can be done with relative ease.” We disagree, as no gen-
eral rule requires that only the easiest cases may be
aggregated. As noted by the California Supreme Court, plain-
tiffs have a viable legal theory. See Aguilar, 24 P.3d at 521
n.35 (noting an “alternative theory, which [is] also legally
sound, that the assertedly unlawful conspiracy consisted of
the various exchange agreements entered into by the various
                GILLEY v. ATLANTIC RICHFIELD CO.               4027
petroleum companies, and was unlawful because of its
effects”) (citation omitted).

   At the stage of a motion to dismiss for failure to state a
claim, it is not our role to determine the soundness of Plain-
tiffs’ economic theory. Even if we, as a savvy court, view
actual proof of the facts pleaded in the SAC as improbable
and conclude that a recovery is remote and unlikely, the com-
plaint should still proceed. Bell Atl. Corp., 127 S. Ct. at 1965.
The analysis we would have to undertake to dismiss the com-
plaint here is not appropriate at the Rule 12 stage.4

   Defendants also argue that bilateral exchange agreements,
in general, are an efficiency-enhancing distribution practice
that promotes, not hinders, competition. The allegations con-
tained in the SAC, however, are that these exchange agree-
ments have anticompetitive effects.

    That exchange agreements like “exclusive dealing” and
“tying” arrangements, may be efficiency-enhancing and thus
procompetitive does not necessarily mean that the anticompe-
titive effects of those types of arrangements or agreements are
always outweighed by procompetitive justifications. See
Brown v. Hansen Publ’ns, Inc., 556 F.2d 969, 971 (9th Cir.
1977) (noting that “exclusive dealing” contracts may be pro-
competitive); NCAA, 468 U.S. at 104 n.26 (noting that “tying”
arrangements may be procompetitive).

   This loggerhead is precisely what a rule of reason analysis
would address. The formulation of the dispute at issue was
long ago laid out. “The true test of legality is whether the
restraint imposed is such as merely regulates and perhaps
thereby promotes competition or whether it is such as may
suppress or even destroy competition.” Bd. of Trade of Chi-
cago v. United States, 246 U.S. 231, 244 (1918). This point
  4
   We note that the decision in Aguilar concerned a summary judgment,
not a dismissal for failure to state a claim.
4028           GILLEY v. ATLANTIC RICHFIELD CO.
of contention is yet another reason to allow the complaint to
proceed.

  Defendants offer a number of other arguments against
aggregation. None of the arguments, however, can sidestep
our precedent.

   Defendants argue that Plaintiffs waived the aggregation
argument by not challenging the district court’s Order Grant-
ing Leave to Amend in their first appeal to the Ninth Circuit.
That order reads, “The court GRANTS leave to amend plain-
tiff’s complaint only to the extent that it alleges that each of
the bilateral agreements, entered into independently between
various defendant gasoline companies, have unreasonable
anti-competitive effects and therefore violate the Sherman
Act.” The purpose behind the district court’s decision to grant
leave to amend was so Plaintiffs could plead a claim different
than the per se violation pled in Aguilar. Plaintiffs complied
by pleading a rule of reason claim based on the aggregate
effects of the exchange agreements.

   Defendants also argue also that Dickson v. Microsoft Corp.,
309 F.3d 193 (4th Cir. 2002), forecloses aggregation of the
bilateral exchange agreements to establish a violation of § 1.
In that case the plaintiff “alleged discrete conspiracies
between Microsoft and two original equipment manufactures
(OEMs): Dell and Compaq. Id. at 210.” The Fourth Circuit
affirmed the district court’s determination “that it could not
consider the cumulative harm of Microsoft’s agreements with
all OEMs but instead was required to consider—individually
—Microsoft’s agreements with Compaq and Dell” because
the complaint “did not allege a conspiracy among Microsoft
and all OEMs; it alleged discrete conspiracies between Micro-
soft and Compaq and Microsoft and Dell.” Id. (emphases
added). In other words, because the plaintiff did not allege the
cumulative effect of Microsoft’s agreements with “all OEMs”
in the complaint, the Fourth Circuit declined considering their
aggregate effects. Dickson is distinguishable from the present
               GILLEY v. ATLANTIC RICHFIELD CO.           4029
case, as the plaintiffs here do expressly allege that each
Defendant’s agreements considered in the aggregate have
anticompetitive effects.

   Defendants also contend that aggregation would subject
firms to unwarranted liability and great uncertainty regarding
the validity of independent business dealings that do not carry
inherent anticompetitive potential. Section 1 liability, how-
ever, is directed not only at inherent anticompetitive conduct,
but also at conduct that has anticompetitive effects. Khan, 522
U.S. at 10. Furthermore, aggregation of the agreements does
not lessen a plaintiff’s burden of demonstrating anticompeti-
tive effects of a given agreement.

   [8] Because the district court’s application of the law was
incorrect, and because we reject Defendants’ arguments
against aggregation, we conclude that the district court erred
in not allowing Plaintiffs to aggregate the agreements to dem-
onstrate their anticompetitive effects.

    c.   The Allegations in the SAC Are Not Necessarily
         Premised on a Conspiracy to Limit Supply and
         Raise Prices.

   [9] The district court concluded that, even if aggregation
were proper, the complaint alleges the existence of a network
of exchange agreements that allow Defendants to limit supply
and raise the price of CARB gas. The district court based that
conclusion on language of the complaint stating that each
Defendant obtained market power “through the use of [the
Defendant’s] exchange agreements, coupled with its own
refining capacity and that of its contracting partners.” How-
ever, that language says nothing more than the exchange
agreements provide access to refining capacity of Defendant’s
competitors through the exchange agreements themselves.
Furthermore, that language, read in the light most favorable
to Plaintiffs, Knievel, 393 F.3d at 1072, certainly does not
plead a “network”, a “precise dance of give-and-take”, or any
4030           GILLEY v. ATLANTIC RICHFIELD CO.
other nomenclature for the operation of a conspiracy to limit
supply or raise prices.

   The district court concluded also that “Plaintiffs cannot
avoid the fact that their Sherman Act claim is, at its core, a
conspiracy claim.” To come to that conclusion, the district
court did not rely on the allegations made in the SAC. Instead,
the court, in effect, probed the soundness of Gilley’s eco-
nomic theory, concluding that the alleged anticompetitive
effects could not result without the intentional collusion pre-
cluded, as a factual allegation, by Aguilar. The district court
illustrated its analysis with a hypothetical:

    Defendant A enters into separate exchange agree-
    ments with B, C, D, E, and F. If B overproduces
    CARB gasoline at some point in time, A may be able
    to take the excess amount and adjust its production
    accordingly. However, in the absence of a conspir-
    acy, C, D, E, and F may also produce excess CARB
    gasoline which cannot be absorbed by A because A
    has already taken the overproduction from B.

The district court may be correct in its understanding of how
the economy or the oil business works, but that is a factual
assessment, not left to the court, even a savvy judge, to decide
on a Rule 12 motion. The hypothetical is not what has been
pled in the SAC. The SAC alleges that anticompetitive effects
have resulted from the exchange agreement, even in the
absence of collusion, and under Rule 12(b)(6), allegations of
material fact are taken as true and construed in the light most
favorable to the plaintiff. Knievel, 393 F.3d at 1072.

   [10] A review of the SAC shows that it alleged that the
existence of the exchange agreements allows a given Defen-
dant in a given geographic market control of enough refining
capacity of CARB gas to keep CARB gas out of the spot mar-
ket and away from unbranded marketers, with the overall
effect of creating supracompetitive prices. Plaintiffs did not
               GILLEY v. ATLANTIC RICHFIELD CO.             4031
allege that Defendants entered into a conspiracy to limit sup-
ply or raise prices, and did not assert a conspiracy to enter
into the exchange agreements. That the district court believes
that the allegedly anticompetitive effects would not actually
occur without a conspiracy does not justify dismissal of the
SAC for failure to state a claim.

   [11] Furthermore, the absence of a conspiracy to limit sup-
ply and raise prices does not eliminate a causal connection
between the exchange agreements and anticompetitive effect.
As discussed above, Plaintiffs must first identify an agree-
ment that unreasonably restrains trade. Here, the SAC prop-
erly identifies a number of agreements satisfying the contract,
combination, or conspiracy requirement of § 1. Next, Plain-
tiffs must plead facts that if taken as true would allow Plain-
tiffs to recover for an antitrust injury. Here, Plaintiffs’ SAC,
construed in the light most favorable to them, alleges that
each Defendant’s control of its refining capacity, coupled
with that of its contracting partners, establishes requisite mar-
ket power in the relevant geographic market sufficient to
establish anticompetitive effects.

  We conclude that the SAC is a sufficient pleading to move
beyond Rule 12(b)(6).

  4.   Plaintiffs Have Standing Against Tesoro.

  Although a plaintiff must directly purchase from a defen-
dant to have standing to recover damages, Ill. Brick Co. v. Illi-
nois, 431 U.S. 720 (1977), an indirect purchaser may
nevertheless have standing to seek injunctive relief. Lucas
Auto. Eng’g, Inc. v. Bridgestone/Firestone, Inc., 140 F.3d
1228, 1235 (9th Cir. 1998).

   [12] Taking Plaintiffs’ allegations as true, and construing
them in the light most favorable to Plaintiffs, at least an indi-
rect purchaser scenario exists in the SAC. In addition to Plain-
tiffs’ allegations that they are “direct purchaser[s] from
4032             GILLEY v. ATLANTIC RICHFIELD CO.
[D]efendants,” the allegation that Tesoro acquired the Avon
refinery from UDS, and that “Tesoro entered into the same
sales and/or exchange agreements that UDS had formerly
entered into with other refiners . . . in connection with the
ownership and operation of the Avon refinery” provides suffi-
cient pleading to conclude that Plaintiffs have standing to
include Tesoro in the SAC.

  5.     We Remand the State Law Claim.

  [13] The district court dismissed Plaintiffs’ claim under
CAL. BUS. & PROF. CODE § 17200 as follows:

          Plaintiffs’ state unfair competition claim rests on
       the same facts as their Sherman Act claim. Because
       the Sherman Act claim is being dismissed at an early
       stage of litigation, the Court finds that the factors
       underlying the assertion of supplemental jurisdiction
       . . . weigh against retention of jurisdiction over the
       remaining state law claim.

Because we reverse the dismissal of the Sherman Act claims,
we also reverse the district court’s dismissal of the state law
claim.

                                III

                         CONCLUSION

   We agree with the California Supreme Court that the Agui-
lar trial court only adjudicated a per se claim of horizontal
price fixing. Therefore, Plaintiffs’ rule of reason claim alleg-
ing that the bilateral exchange agreements have anticompeti-
tive effects is not precluded. In addition, Ninth Circuit and
Supreme Court precedent allow for aggregation of the indi-
vidual exchange agreements to demonstrate market power and
anticompetitive effect in a given market. Though the district
court may think the prospects of Gilley actually proving the
               GILLEY v. ATLANTIC RICHFIELD CO.             4033
allegations contained in the SAC to be highly improbable—
and may be correct in that assessment—that is not a valid
basis for Rule 12 dismissal.

  REVERSED and REMANDED.



CALLAHAN, Circuit Judge, dissenting:

   I write separately because I think that the majority reads the
California Supreme Court’s opinion in Aguilar v. Atl. Rich-
field Co., 24 P.3d 493 (Cal. 2001), too narrowly and fails to
appreciate the pleading standard set forth in Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 127 S. Ct. 1955 (2007). When Gil-
ley’s Second Amended Complaint (sometimes referred to as
“SAC”) is viewed in light of these cases, it is too broad and
amorphous and fails to limit his claims to those that are not
precluded by Aguilar. Furthermore, because Gilley has been
on notice since 2002 that his complaint must be limited to
those claims not precluded by Aguilar, has had several oppor-
tunities to submit a properly circumscribed amended com-
plaint, and has failed to do so, I would affirm the district
court’s dismissal of the Second Amended Complaint.

                               I

   Section 1 of the Sherman Act prohibits “[e]very contract,
combination in the form of trust or otherwise, or conspiracy,
in restraint of trade or commerce among the several States.”
15 U.S.C. § 1. The Supreme Court has clearly established that
the section is limited to prohibiting unreasonable restraints of
trade. See Texaco Inc. v. Dagher, 547 U.S. 1, 5 (2006).
Whether a plaintiff pursues a per se claim or a rule of reason
claim under § 1, the first requirement is to allege a “contract,
combination in the form of trust or otherwise, or conspiracy.”

   I agree with the majority that the core of the plaintiff’s
claims in Aguilar was a per se claim based on an alleged
4034           GILLEY v. ATLANTIC RICHFIELD CO.
unlawful conspiracy among petroleum companies. I also
agree that the California Supreme Court in Aguilar recognized
that plaintiffs “attempted to introduce an alternative theory,
which was also legally sound [ ], that the assertedly unlawful
conspiracy consisted of the various exchange agreements
entered into by the various petroleum companies, and was
unlawful because of its effects.” Aguilar, 24 P.3d at 521, n.35.
The California Supreme Court agreed with the Court of
Appeal that this attempt came too late and rejected it for that
reason. Id.

  The California Supreme Court’s opinion in Aguilar, how-
ever, is broader than the footnote referenced by the majority.
The Aguilar opinion goes on to state:

    Just as the superior court’s order granting the petro-
    leum companies summary judgment was not errone-
    ous as to Aguilar’s primary cause of action for an
    unlawful conspiracy under section 1 of the Cart-
    wright Act to restrict the output of CARB gasoline
    and to raise its price, neither was it erroneous as to
    her derivative cause of action, which was for an
    unlawful conspiracy under the unfair competition
    law for the same purpose.

    ...

    The petroleum companies carried their burden of
    persuasion to show that there was no triable issue of
    material fact and that they were entitled to judgment
    as a matter of law as to Aguilar’s unfair competition
    law cause of action. They did so by doing so as to
    her Cartwright Act cause of action. Again, they car-
    ried their burden of production to make a prima facie
    showing of the absence of any conspiracy, but she
    did not carry her shifted burden of production to
    make a prima facie showing of the presence of an
    unlawful one.
                GILLEY v. ATLANTIC RICHFIELD CO.              4035
    It is true, as Aguilar argues, that her unfair competi-
    tion law cause of action is not based on allegations
    asserting a conspiracy unlawful under the Cartwright
    Act. But it is indeed based on allegations asserting a
    conspiracy, specifically, one unlawful at least under
    the unfair competition law itself. As stated, the
    petroleum companies showed that there was no tri-
    able issue of the material fact of conspiracy. Aguilar
    claims that conspiracy is not an element of an unfair
    competition law cause of action in the abstract as a
    matter of law. Correctly so. (See Bus. & Prof. Code,
    § 17200). But she simply cannot deny that conspir-
    acy is indeed a component of the unfair competition
    law cause of action in this case as a matter of fact.

Id. at 521 (emphasis in original).

   This portion of Aguilar holds that the plaintiffs had failed
to demonstrate the existence of a conspiracy that was per se
illegal or otherwise illegal under the Sherman Act. With this
understanding, if Gilley were not asserting that the defendants
entered into a conspiracy in violation of the Sherman Act, I
could agree with the majority that “a claim that Defendants
have entered into exchange agreements, without a conspiracy
to control supply or to set prices,” would state a claim that is
not precluded by Aguilar. However, even assuming that in the
abstract the Second Amended Complaint can be interpreted as
alleging such a limited claim, it clearly alleges much more
than that and it is far too late in the litigation process to pre-
sume that this is anything but intentional.

                               II

   The preclusive effect of Aguilar is woven through the
numerous court decisions in Gilley’s federal action. Gilley
filed this class action in 1998, and its proceedings were stayed
pending the outcome of Aguilar. After the California Supreme
Court issued its opinion in Aguilar, the defendants filed a
4036           GILLEY v. ATLANTIC RICHFIELD CO.
motion for summary judgment. Gilley opposed the motion
and also offered to file an amended complaint. The district
court granted the motion for summary judgment. The district
court held that pursuant to the doctrine of issue preclusion,
Gilley was barred from relitigating the conspiracy alleged in
Aguilar. The court denied Gilley’s request to amend the com-
plaint to allege continuing violations of antitrust laws subse-
quent to the time period involved in Aguilar, reasoning:

    The exchange agreements were already judged by
    the California Supreme Court not to be evidence of
    a conspiracy. The court finds that the proposed
    amended complaint merely alleges the ongoing use
    of these supply agreements and not any new con-
    duct. Issue preclusion therefore bars Gilley from reli-
    tigating whether use of the ongoing agreements
    constitute an illegal conspiracy under the Sherman
    Act.

   The district court, however, agreed with Gilley that “his
rule-of-reason claim has not been litigated to the extent that
he is alleging that the individual bilateral exchange agree-
ments violate the anti-trust laws due to their anti-competitive
effect.” Accordingly, it granted Gilley leave to file an
amended complaint “only to the extent that it alleges that each
of the bilateral agreements, entered into independently
between various defendant gasoline companies, have unrea-
sonable anti-competitive effects and therefore violate the
Sherman Act.”

   Gilley amended his complaint. Defendants responded by
filing a motion to dismiss the First Amended Complaint
(“FAC”). The district court granted the motion, explaining:

    After careful scrutiny of the FAC, the court has been
    unable to discern any allegation that any of the par-
    ties in any of the bilateral agreements entered these
    agreements with an unlawful intent or purpose to
               GILLEY v. ATLANTIC RICHFIELD CO.                4037
    restrain competition. In the few instances that Plain-
    tiff does allege an improper purpose, he does so by
    alleging joint action among all, or substantially all of
    the defendants. As discussed below, Plaintiff’s
    pleading of such joint purpose or action regarding
    the various defendants is improper and will not be
    considered by the court. Therefore, Plaintiff has
    failed to properly allege “concerted action” regard-
    ing any individual bilateral exchange agreement.

The district court dismissed the case with prejudice, com-
menting that because “Plaintiff was already granted leave to
amend his complaint previously, and at this late date was
unable to set forth a valid anti-trust claim, it appears that
Plaintiff cannot allege sufficient facts constituting a valid § 1
claim.”

  Gilley appealed, and we reversed and remanded to allow
Gilley an opportunity to file a further amended complaint. We
held that the district court had abused its discretion by deny-
ing Gilley an opportunity to amend his complaint.

   When Gilley filed a Second Amended Complaint, defen-
dants again moved to dismiss, and the district court granted
the motion. It explained:

    Plaintiffs do not allege that each exchange agree-
    ment has a discrete effect on competition which can
    be viewed together with the separate effects of the
    other exchange agreements. Instead, Plaintiffs allege
    the existence of a network of exchange agreements
    that allow Defendants to coordinate their production
    and output, thereby limiting the amount of CARB
    gasoline on the rack or spot market and allowing
    Defendants to raise prices to branded dealers.

    Even if a single defendant and all of the defendants
    who contracted with that defendant cumulatively had
4038           GILLEY v. ATLANTIC RICHFIELD CO.
    sufficient market power to substantially impair com-
    petition, Plaintiffs would need to make the further
    showing that all of these defendants worked together
    through the use of the exchange agreements and stra-
    tegic shutdowns or decreased production to stabilize
    the spot market and avoid the depression of gasoline
    prices. . . .

    Plaintiffs cannot avoid the fact that their Sherman
    Act claim is, at its core, a conspiracy claim. Plain-
    tiffs’ theory of recovery rests upon the existence of
    a web of exchange agreements that allegedly allows
    all of the Defendants to engage in a precise dance of
    give-and-take with the goal of maintaining the deli-
    cate balance of CARB production. Coordinated
    action is essential to Plaintiffs’ claim.

    After four attempts to plead around a conspiracy
    claim, Plaintiffs still fail to allege that the bilateral
    exchange agreements, viewed independently, consti-
    tute an unreasonable restraint on trade. Plaintiffs’
    inability to establish a causal connection between the
    individual exchange agreements, and anti-
    competitive harm is fatal to Plaintiffs’ Sherman Act
    claim.

   A critical aspect of the district court’s perspective is its
determination that the SAC does not allege “that each
exchange agreement has a discrete effect on competition
which can be viewed together with the separate effects of
other exchange agreements.” Rather, the district court sees the
SAC as alleging “a network of exchange agreements” that
“allow Defendants to coordinate their production and output.”
In essence, the district court reads the SAC as not alleging
that the bilateral agreements “violate the anti-trust laws due to
their anti competitive effect,” but rather that the agreements
facilitate coordinated action by the defendants that unlawfully
restrains trade.
               GILLEY v. ATLANTIC RICHFIELD CO.               4039
   This distinction is critical. If the bilateral agreements in
themselves have an illegal effect on competition (when aggre-
gated), then the bilateral agreements constitute the “contract,
combination or conspiracy” required for a claim under § 1 of
the Sherman Act. If, however, the bilateral agreements only
facilitate coordinated activity, then to maintain a claim under
§ 1 of the Sherman Act, Gilley must show some meeting of
the minds, some “contract, combination or conspiracy,”
between those defendants whom Gilley alleges coordinated
their actions. Although a plaintiff might well be able to do so
in the abstract, here, Gilley is precluded by Aguilar from
asserting that the defendants so conspired.

                              III

   The Second Amended Complaint implicitly, if not explic-
itly, asserts a conspiracy. The charging paragraphs of the SAC
describe the defendants’ parallel actions and imply the exis-
tence of a conspiracy. The SAC asserts:

       California’s CARB gas supply is generally manu-
    factured primarily by defendants, California branded
    refiners, who are engaged in the business of refining,
    distributing and selling almost 100% of the CARB
    gas in the state of California during the class period.
    California remains largely isolated from external
    sources of supply.

       All California refiners, now also major retail mar-
    keters, control supply and pricing from production to
    distribution, in part, through supply agreements that
    require dealers to purchase gasoline exclusively at
    each branded refiner’s present DTW price, a price
    that is always greater than the rack price and cost of
    distribution.

      California refiners’ weekly refinery production
    decisions are influenced by, among other things, spot
4040              GILLEY v. ATLANTIC RICHFIELD CO.
      price impact, refiner margins, bilateral exchange
      partners’ market needs, ability to draw inventory
      from bilateral exchange partners, and overall market
      supply.

         With the impending introduction of CARB gaso-
      line in 1996, each of the defendants or their pre-
      decessors in interest, entered into new sales and/or
      exchange agreements with other defendants, many of
      which provided for the provision of CARB gas “as
      mutually agreed” (AMA) with no minimum or maxi-
      mum.

The determination that these paragraphs assert a conspiracy is
reinforced by the next paragraph of the SAC which reads:

      The sales and exchange agreements known to plain-
      tiffs that are subject of this action are listed on the
      attached Exhibit . . . . On information and belief,
      plaintiffs allege that defendants have entered into
      other sales and exchange agreements, presently
      unknown to plaintiffs, with similar intent and effect.

Certainly the tenor of this paragraph is that the “similar intent
and effect” violates antitrust laws. Moreover, in light of the
preceding paragraphs and the failure to assert any other spe-
cific violation of the Sherman Act, the alleged violation must
be one of conspiracy or collusion.

   This allegation of conspiracy is carried forward in the
SAC’s allegations against particular defendants, starting with
Chevron.1 It lists three exchange agreements that Chevron
entered into with Exxon, Shell, and Tosco Refining Co., and
alleges, on information and belief, that Chevron has entered
  1
    The allegations against the other defendants are similar to the allega-
tions against Chevron.
                   GILLEY v. ATLANTIC RICHFIELD CO.                   4041
similar agreements “for the delivery of CARB in Northern
California.” The SAC then alleges:

         Chevron’s intent and purpose in entering into
      these exchange agreements was to limit refining
      capacity for CARB gas and/or to keep CARB gas
      out of the spot market and away from unbranded
      marketers.

         Through the use of these exchange agreements,
      coupled with its own refining capacity and that of
      its contracting partners, Chevron has obtained suf-
      ficient market power to limit the supply of CARB
      gas to unbranded marketers and to raise the price at
      which it sells CARB gas in Northern California to
      supracompetitive levels. These agreements have had
      the effect of raising CARB gas prices in Northern
      California above competitive levels, without any
      countervailing procompetitive benefit.

(Emphasis added).

   These paragraphs reveal, as the majority notes, how Gilley
proposes to meet the market power requirement for a claim
under § 1 of the Sherman Act, but they leave the reader unin-
formed as to how the individual exchange agreements alleg-
edly violated the Sherman Act “without a conspiracy to
control supply or to set prices.” In his brief, Gilley responds
by pointing to the paragraphs concerning the relationship
between Chevron and Tosco. These paragraphs set forth vari-
ous reasons for why the defendants purportedly entered into
particular agreements,2 suggest an industry-wide conspiracy,3
  2
   For example, the SAC sets forth a 1994 individual exchange agreement
between Chevron and Tosco and alleges:
      Chevron’s intent and purpose in entering into this agreement with
      Tosco was to place its surplus CARB gas with other branded
4042              GILLEY v. ATLANTIC RICHFIELD CO.
and assert that the individual agreements facilitated a combi-
nation or conspiracy.4 Again, the paragraphs seem to allege a
conspiracy. They certainly do not clearly allege that the
exchange agreements themselves constitute a restraint of trade
or suggest why the defendants’ actions were “collusive, rather
than independent, action.” See Aguilar, 24 P.3d at 519.

   In sum, the SAC, fairly read, is not limited to alleging that
the bilateral exchange agreements are themselves restraints of
trade. Instead, its broad allegations encompass conspiracy
claims that are precluded by Aguilar. Indeed, the majority so
concludes when it states “[t]he SAC may include allegations
which are precluded by Aguilar, but not of all of what the
SAC alleges is precluded.”

    refiners to maximize returns. Chevron intended to and did rear-
    range its CARB gas supply to avoid a market imbalance caused
    by CARB gas flowing to independent marketers.
If Chevron and Tosco agreed to restrain the production of gas, the individ-
ual exchange agreement might well be a contract to restrain trade pursuant
to § 1 of the Sherman Act. The paragraph, however, does not say that the
parties agreed. Instead, it only addresses Chevron’s intent and purpose.
This purpose and intent would presumably motivate Chevron to act inde-
pendently or interdependently without any agreement as to purpose or
intent with Tosco.
   3
     For example, the SAC alleges that “[t]hrough the use of these exchange
agreements, coupled with its own refining capacity and that of its contract-
ing partners, Chevron has obtained sufficient market power to limit the
supply of CARB gas to unbranded marketers and to raise the price at
which it sells CARB gas.” This implies a conspiracy and does not allege
that there was a meeting of the minds of the parties to any of the individ-
ual exchange agreements to raise the price of gasoline.
   4
     For example, the SAC alleges that “Tosco’s intent and purpose in
entering into this agreement with Chevron was [to] join the ‘club’ of major
branded refiners and to give Chevron the opportunity to place its surplus
CARB gas with other branded refiners to maximize returns.” This is con-
fusing, as it indicates that Tosco’s intent was to give Chevron “the oppor-
tunity” to maximize its return. This seems to suggest that the individual
exchange agreement facilitated, but did not in itself provide for, the max-
imization of Chevron’s return.
                   GILLEY v. ATLANTIC RICHFIELD CO.                    4043
                                     IV

   It is this breadth of the SAC that concerns me as it is incon-
sistent with the spirit of Twombly, 127 S. Ct. 1955. Although
Twombly involved an alleged conspiracy based on parallel
conduct and this case is ostensibly not a conspiracy case,
nonetheless the Supreme Court’s concerns reverberate in this
case. The Supreme Court reiterated that Federal Rule of Civil
Procedure 8(a)(2) requires “ ‘a short and plain statement of
the claim showing that the pleader is entitled to relief,’ in
order to ‘give the defendant fair notice of what the . . . claim
is and the grounds upon which it rests.’ ” Twombly, 127 S. Ct.
at 1964 (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).5
It commented that a plaintiff’s obligation “requires more than
labels and conclusions, and a formulaic recitation of the ele-
ments of a cause of action” and that “[f]actual allegations
must be enough to raise a right to relief above the speculative
level.” Id. at 1965 (internal citations omitted). The Supreme
Court reaffirmed its earlier decisions holding that “something
beyond the mere possibility of loss causation must be alleged,
lest a plaintiff with a largely groundless claim be allowed to
take up the time of a number of other people with the right to
do so representing an in terrorem increment of the settlement
value,” and that “when the allegations in a complaint, how-
ever true, could not raise a claim of entitlement to relief, this
basic deficiency should . . . be exposed at the point of mini-
mum expenditure of time and money by the parties and the
  5
    The Court went on to disapprove the language in Conley that “a com-
plaint should not be dismissed for failure to state a claim unless it appears
beyond doubt that the plaintiff can prove no set of facts in support of his
claim which would entitle him to relief.” Twombly, 127 S. Ct. at 1968
(quoting Conley, 355 U.S. at 45-46). The Court held that:
      [t]he phrase is best forgotten as an incomplete, negative gloss on
      an accepted pleading standard: once a claim has been stated ade-
      quately, it may be supported by showing any set of facts consis-
      tent with the allegations in the complaint.
Twombly, 127 S. Ct. at 1969.
4044                GILLEY v. ATLANTIC RICHFIELD CO.
court.” Id. at 1966 (internal quotation marks and citations
omitted). The Court concluded that allegations of parallel
conduct in themselves do not provide a sufficient basis to sus-
tain a conspiracy claim.6

   Similarly, in this case the district court read the complaint
as not stating a viable cause of action. It determined that the
SAC did not allege that “each exchange agreement has a dis-
crete effect on competition which can be viewed together with
the separate effects of other exchange agreements,” but rather
as alleging “the existence of a network of exchange agree-
ments that allow Defendants to coordinate their production
and output.” I agree with the district court. I read the SAC as
not asserting that the bilateral agreements, in themselves,
restrain trade, but that they facilitate or make it easier for the
defendants to coordinate their actions to restrain trade.7 The
  6
   The Court noted:
      We think that nothing contained in the complaint invests either
      the action or inaction alleged with a plausible suggestion of con-
      spiracy. As to the ILECs’ supposed agreement to disobey the
      1996 Act and thwart the CLECs’ attempts to compete, we agree
      with the District Court that nothing in the complaint intimates
      that the resistance to the upstarts was anything more than the nat-
      ural, unilateral reaction of each ILEC intent on keeping its
      regional dominance. The 1996 Act did more than just subject the
      ILECs to competition; it obliged them to subsidize their competi-
      tors with their own equipment at wholesale rates. The economic
      incentive to resist was powerful, but resisting competition is rou-
      tine market conduct, and even if the ILECs flouted the 1996 Act
      in all the ways the plaintiffs allege, . . . there is no reason to infer
      that the companies had agreed among themselves to do what was
      only natural anyway; so natural, in fact, that if alleging parallel
      decisions to resist competition were enough to imply an antitrust
      conspiracy, pleading a § 1 violation against almost any group of
      competing businesses would be a sure thing.
127 S. Ct. at 1971.
  7
    The district court explained:
      Even if a single defendant and all of the defendants who con-
      tracted with that defendant cumulatively had sufficient market
                  GILLEY v. ATLANTIC RICHFIELD CO.                   4045
majority seems to admit that the SAC includes allegations of
conspiracy, but contends that the SAC must be allowed
because it can also be read to allege only that each exchange
agreement has a discrete effect on competition. This is the
type of “in terrorem increment of the settlement value” that
the Supreme Court mentioned in Twombly. Id. at 1966. More-
over, when viewed in the light of the preclusive effect of
Aguilar, the SAC “does not raise a claim of entitlement to
relief.” Id.

   Furthermore, there can be little doubt that the broad scope
of the SAC was intentional. Gilley has known since 2002 that
following Aguilar, he was precluded from alleging a conspir-
acy. Nonetheless, he has thrice been given the opportunity to
amend his complaint to limit it to a claim based solely on the
alleged anti-competitive effect of the individual exchange
agreements absent a conspiracy, and has thrice proffered
amended complaints that continue to assert, albeit ever more
subtly, the existence of a conspiracy. I do not necessarily
quarrel with the majority that it might be possible for Gilley
to allege an antitrust claim limited to issues that are not pre-
cluded by Aguilar, but he has declined to do so. Accordingly,
the district court properly struck the SAC. Furthermore, the
district court’s denial of leave to amend does not appear to me
to have been an abuse of discretion.8

      power to substantially impair competition, Plaintiffs would need
      to make the further showing that all of these defendants worked
      together through the use of the exchange agreements and strate-
      gic shutdowns or decreased production to stabilize the spot mar-
      ket and avoid the depression of gasoline prices. . . .
   8
     In Griggs v. Pace Amn. Group, Inc., 170 F.3d 877, 880 (9th Cir. 1999),
we held that the “district court determines the propriety of a motion to
amend by ascertaining the presence of any of four factors: bad faith, undue
delay, prejudice to the opposing party, and/or futility.” Generally, “this
determination should be performed with all inferences in favor of granting
the motion.” Id. Nonetheless, “we have noted that a district court does not
abuse its discretion in denying a motion to amend a complaint . . . when
the movant presented no new facts but only new theories and provided no
4046              GILLEY v. ATLANTIC RICHFIELD CO.
                                     V

  Although much of what the majority has to say about
aggregation may be correct, I do not think that aggregation
cures the defects in the SAC. Initially, I note that in an oligop-
oly, aggregation cannot be as broad as alleged in the SAC.
More importantly, aggregation, which addresses the second
prong of a § 1 claim, cannot overcome the SAC’s failure to
adequately identify the agreements that allegedly violate the
Sherman Act.

   In Twin City Sportservice, Inc. v. Charles O. Finley & Co.,
676 F.2d 1291, 1302 (9th Cir. 1982), we addressed the ques-
tion of aggregation on a claim for an unreasonable restraint of
trade under § 1 of the Sherman Act. We held:

     the issue is whether a district court, in assessing the
     antitrust liability of a defendant, may look to the
     overall effects of a defendant’s conduct in the rele-
     vant market, or is limited to looking at the market
     implications of the one contract between the antitrust
     plaintiff and defendant. At least in the factual con-
     text of the instant litigation, we think the district
     court correctly assessed Sportservice’s aggregate
     pattern of conduct in the relevant market.

I agree with the majority that pursuant to Twin City, Gilley
may aggregate the contracts entered into by each defendant in
determining that defendant’s marketpower. The allegations in
the SAC, however, are not so limited. Rather, they appear to

satisfactory explanation for his failure to fully develop his contentions
originally.” Nunes v. Ashcroft, 375 F.3d 805, 808 (9th Cir. 2004) (quoting
Vincent v. Trend W. Technical Corp., 828 F.2d 563, 570-71 (9th
Cir.1987)) (internal quotation marks omitted). Here, assuming that Gilley
could, in the abstract, amend his complaint to state a claim that is not pre-
cluded by Aguilar, his repeated failure to do just that suggests that it
would be futile to offer him another chance to do so.
               GILLEY v. ATLANTIC RICHFIELD CO.             4047
allow the aggregation of all the bilateral agreements by all of
the defendants. I know of no authority or reason that would
allow such an aggregation, as it would include the entire mar-
ket. Accordingly, I think that Gilley is limited to aggregating,
for example, Chevron’s contracts with Exxon, Shell and
Tosco, in asserting that Chevron has sufficient market power
to effect the price of CARB gasoline, and may not include in
the calculation of Chevron’s alleged market share any bilat-
eral agreements entered into by Exxon, Shell or Tosco with
any party other than Chevron.

   Whatever the proper scope of aggregation, and accepting
that the aggregation of each defendant’s bilateral agreements
gave each defendant sufficient market power to affect the
price of gasoline, the SAC still fails to meet the first require-
ment for a § 1 claim — an allegation of a meeting of the
defendants’ minds. See Twombly, 127 S. Ct. at 1965. Twin
City does not help Gilley on this issue. There, Sportservice
had a practice of entering into exclusive concessionaire con-
tracts, which were in themselves agreements to restrain trade.
The only question was whether Sportservice had sufficient
market power. Here, because the SAC does not clearly allege
that the individual exchange agreements inherently restrain
trade, the aggregation of Chevron’s individual agreements
might show market power, but it would not meet the require-
ment that Gilley assert an agreement to restrain trade.

   The majority’s over-reliance on aggregation may be seen in
its conclusion that the SAC alleges “that the existence of the
exchange agreements allows a given Defendant in a given
geographic market control of enough refining capacity of
CARB gas to keep CARB gas out of the spot market and
away from unbranded marketers, with the overall effect of
creating supracompetitive prices.” This conclusion allows
effect to take the place of intent in precisely the way that the
Supreme Court criticized in Twombly, 127 S. Ct. at 1971.

   “Spot market” is defined in the SAC as “a market for short-
term bulk gasoline purchases,” and “unbranded marketers”
4048           GILLEY v. ATLANTIC RICHFIELD CO.
refer to “jobbers and dealers who sell unbranded product not
associated with the name brand of a branded refiner such as
the defendants herein.” These definitions indicate that “spot
markets” exist only when a refiner produces more gasoline
than can be sold by its “branded dealers.” It follows that
because “spot markets” produce a lower return to the refiner
of gasoline than the refiner obtains through branded dealers,
spot markets are a result of inefficiencies on the part of refin-
ers. Accordingly, even without any collusion, a refiner is
strongly motivated to avoid having to sell gasoline in the spot
markets. Thus, a narrow focus on effect as a result of aggrega-
tion would convert self-interest parallel action, similar to that
found to be legal in Twombly, into an antitrust violation, even
when the plaintiff is precluded from showing any agreement
between the competing businesses.

                       VI.   Conclusion

   We recently reiterated in Kendall v. Visa U.S.A., Inc., 518
F.3d 1042, 1047 (9th Cir. 2008), that “[t]o state a claim under
Section 1 of the Sherman Act, 15 U.S.C. § 1, claimants must
plead not just ultimate facts (such as a conspiracy), but evi-
dentiary facts which, if true, will prove: (1) a contract, combi-
nation or conspiracy among two or more persons or distinct
business entities; (2) by which the persons or entities intended
to harm or restrain trade or commerce . . . (3) which actually
injures competition.” Gilley, in order to state a § 1 claim,
must plead “a contract . . . by which the persons or entities
intended to harm or restrain trade.” Despite its length and
detail, the SAC does not clearly assert which individual agree-
ment or agreements constitute in themselves a “contract . . .
by which the persons or entities intended to harm or restrain
trade.” Rather, the SAC is fairly read as alleging the existence
of a network of exchange agreements that arguably allowed
the defendants to unlawfully coordinate their production and
output. But given the preclusive effect of Aguilar, Gilley can-
not show such coordination. The SAC is not saved by the
argument that it could be read to encompass a claim that the
               GILLEY v. ATLANTIC RICHFIELD CO.             4049
individual agreements in themselves constitute a restraint of
trade because the SAC does not provide the defendants fair
notice of such a claim and the grounds upon which it rests.
See Twombly, 127 S. Ct. at 1964. Moreover, aggregation does
not save the SAC because it does not show that the defen-
dants’ adjustments of CARB production were part of any
agreement or conspiracy, rather than independent efforts to
maximize profits. See Twombly, 127 S. Ct. at 1971. Finally,
I note that, as written, the SAC might allow Gilley to seek dis-
covery on, and to assert, allegations of conspiracy that Gilley
concedes he is precluded by Aguilar from asserting as a cause
of action. For these reasons, I would affirm the district court’s
dismissal of the Second Amended Complaint without leave to
amend.
