Closing the Doors to (Antitrust) Plaintiffs?
Today, in a 7-2 opinion, in Bell Atlantic v. Twombly, the Supreme Court ruled that the mere assertion in a complaint of an underlying agreement violating Section 1 of the Sherman act was insufficient to withstand a motion to dismiss when the parallel behavior in question could just as easily be explained as independent behavior. The majority opinion, authored by Justice Souter, emphasizes the high costs associated with antitrust discovery. In reaching its conclusion, the Court “retires”—as it puts it—its 1957 decision in Conley v. Gibson in which the Court spoke of “the accepted rule that a complaint 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 is an important case for the antitrust bar, but it may matter everywhere. How much did the door to federal court close today?
David Fischer at the Antitrust Review usefully summarizes reactions to today’s opinion. I posted on this case after the oral argument was heard in the Supreme Court. That argument made much of Form 9 attached to the Federal Rules of Civil Procedure. In my post, I emphasized the important role that information asymmetry should play in how we assess pleading requirements. Some facts are known uniquely to defendants, others to plaintiffs: how should we take that into account in framing our pleading rules?
The majority opinion in Twombly makes very little of this. Form 9 is discussed in footnote 10 of the majority opinion at pages 18 to 19:
Apart from identifying a seven-year span in which the §1 violations were supposed to have occurred ..., the pleadings mentioned no specific time, place, or person involved in the alleged conspiracies. This lack of notice contrasts sharply with the model form for pleading negligence, Form 9, which the dissent says exemplifies the kind of “bare allegation” that survives a motion to dismiss. Post, at 6. Whereas the model form alleges that the defendant struck the plaintiff with his car while plaintiff was crossing a particular highway at a specified date and time, the complaint here furnishes no clue as to which of the four ILECs (much less which of their employees) supposedly agreed, or when and where the illicit agreement took place. A defendant wishing to prepare an answer in the simple fact pattern laid out in Form 9 would know what to answer; a defendant seeking to respond to plaintiffs’ conclusory allegations in the §1 context would have little idea where to begin.
This discussion misses a number of crucial points. We should first put the “answer” problem to one side. As a look at any recently-filed answer makes clear, we know how the defendant is going to answer: the defendant is simply going to deny the allegation.
Focus instead on what Form 9 says. As Justice Stevens notes in his dissenting opinion, see at page 6, the bare allegation of negligence in Form 9 would have been a conclusion of law under old-school pleading. But it is exactly what Form 9 contemplates and nothing in the word “negligence” gives the defendant any sense of the way in which negligence is claimed. It is just asserted, with nothing more. Footnote 10 of the majority opinion just skips over this entirely in emphasizing that the plaintiff there does list many facts. Yes, indeed; probably all of the facts known to the plaintiff but nothing about how the car was actually driven—something unknown to the plaintiff—just that it was driven negligently.
If we turn back to antitrust, as Justice Stevens notes at page 21 of his opinion, the assertion of negligence in Form 9 is no less bare than the standard assertion of the existence of a conspiracy in an antitrust complaint. The problem, of course, is the one-sidedness of the information available on the existence (or non-existence) of a conspiracy, a point that Justice Stevens emphasizes at pages 17 to 18 of his opinion. Often the plaintiffs won’t be able to get at actual facts of conspiracy—the who, what when and where contemplated by footnote 10—without discovery.
The majority opinion makes no effort to explain how we as a society should confront this core one-sidedness of information. This is hardly just an antitrust problem. We will constantly confront information that is systematically more available to one side more than the other, and we will see that in cases across the board, including the discrimination cases that receive some attention in today’s opinions. The whole point of the federal rules of civil procedure—rules controlled by the Supreme Court—is to figure out exactly how to manage that one-sidedness.
The critical question isn’t how to frame the answer, the problem posed by footnote 10, but rather how to frame discovery, and more generally, how to manage the one-sidedness of information. It is the fear of discovery run amok that drives the majority opinion—see the extensive quotation in footnote 6 of the majority opinion of a 1989 article by Judge Frank Easterbrook—and yet the Court offers no guidance as to how matters might be improved.
Under the Rules Enabling Act, the rules of civil procedure are squarely in the Supreme Court’s hands. If the current discovery rules don’t work—in antitrust cases or other cases—the Court should fix them. This is a problem of institutional design entrusted to the Court by Congress. The opinion in Twombly acts as if the discovery rules come from Mars rather than the Supreme Court itself. And if the Court believes that sensible discovery rules cannot be crafted, then we need to consider substituting regulatory approaches for courts. Private litigation substitutes, at least in part, for regulation.
Does the fact that the critical information regarding the existence or nonexistence of a possible conspiracy resides in the hands of potential defendants mean that we need to expand the civil investigative powers of the Department of Justice? I don’t have a quick answer to that question, but I think we should be disappointed that the Supreme Court doesn’t feel the need to address at all the problem of the one-sidedness of information.