Reading Twombly Tea Leaves on Boylston Street

Yesterday, the Supreme Court heard arguments in Bell Atlantic v. Twombly, one of two antitrust-focused cases this term. (The second case, Weyerhaeuser v. Ross-Simmons is being argued today (Jason Harrow at SCOTUSblog has a good preview of that case)). Twombly focuses on the pleading requirements established by the Federal Rules of Civil Procedure, and in particular, how those rules will apply to plaintiffs bringing antitrust complaints. With the Supreme Court’s new policy of same-day release of the transcripts of oral argument, we can now guess in real-time at what the Court will do. In truth, we could guess before (and did), but now we have more than second-hand accounts to go on. What should we make of yesterday’s argument?

As Howard Bashman notes in his quick write-up of the case, the case turns on that staple of first-year civil procedure, Rule 8 of the FCRP. That rule requires that a pleading set forth “a short and plain statement of the claim showing that the pleader is entitled to relief.” What might that look like? Generations of students have considered Form 9 attached to the rules and that is precisely what the Supreme Court did yesterday. The heart of Form 9 is its second sentence: “On June 1, 1936, in a public highway called Boylston Street in Boston, Massachusetts, defendant negligently drove a motor vehicle against plaintiff who was then crossing said highway” That’s all folks. Nothing about how the car was being driven—too fast? swerving?—just where and when and only one more word—“negligently.”

Read the Form 9 sentence again and focus on who knows what and what Form 9 tells us about the role of information asymmetry—what I know that you don’t know—in pleading. Many of the core facts of the accident are known equally to both parties: the date, the location, the fact that a car struck a pedestrian. Presumably, both the plaintiff and the defendant have equal access to that information, and Form 9 seems to require that the plaintiff plead the facts known to her so as to best give notice of the claim alleged. But one set of facts isn’t well-known to the plaintiff, that is, exactly how the car was driven. Was the driver yacking away on his cell phone and not paying sufficient attention? (I guess, we can safely say, not on June 1, 1936, and maybe not even distracted by the radio (when did radios become standard equipment in cars?).) Did the driver have a child in the back seat and turned at just the wrong moment to hand back a sippy cup?

We don’t know and neither does the plaintiff. That is the key point. Form 9 tells the plaintiff to plead the facts that she can know before she undertakes discovery. She does exactly that in Form 9. But she can’t know the underlying facts that would give rise to a finding of negligence, and, as to that, Form 9 just lets the plaintiff assert—in just one word—that the car was driven “negligently.” Justifying that at trial will require more facts, facts that the plaintiff does not have access to when the complaint is filed and facts that will have to emerge through the process of discovery and trial.

What does all of that tell us about the complaint in Twombly? The oral argument focused on Paragraph 51 of the complaint. That paragraph alleges:

“In the absence of any meaningful competition between the RBOCs in one another’s markets, and in light of the parallel course of conduct that each engaged in to prevent competition from CLECs within their respective local telephone and/or high speed internet services markets and the other facts and market circumstances alleged above, Plaintiffs allege upon information and belief that Defendants have entered into a contract, combination or conspiracy to prevent entry in their respective local telephone and/or high speed internet service markets and have agreed not to compete with one another and otherwise allocated customers and markets to one another.”

(If you don’t speak telphonese, “RBOCs” are the Regional Bell Operating Companies, meaning, to again search for English, the local phone companies that emerged from the break-up of the original AT&T, while a “CLEC” is a competitive local exchange carrier, meaning a new entrant into the landline phone market.)

The core allegation is one of market division: you take the East, I’ll take the West, and we won’t compete with each other. Market division is, as we put it, a per se violation of Section 1 of the Sherman Act, meaning that no elaborate proof of markets or market power is required to make out the violation.

Of course, a plaintiff actually has to prove an agreement as Section 1 of the Sherman Act requires a contract in restraint of trade. Independent parallel behavior isn’t enough—even if the defendants are watching each other quite carefully. Paragraph 51 of the complaint alleges parallel behavior—the RBOCs have not entered each other’s markets—and then—giant puff of smoke and POOF—agreement. We are given no facts of the agreement—where and when and what brands of cigars were being smoked in the proverbial smoke-filled room?—but just a bald assertion that an agreement exists. Other parts of the complaint try to make out why the RBOCs should have entered and why not entering was against their own interests, all in an effort to make out a so-called “plus” factor is you are reading the cases, but there is ultimately little more than an allegation of parallel behavior and then a claim of agreement.

More than that will be required at trial to win an antitrust case. The Supreme Court’s 1976 decision in Matsushita requires that “[t]o survive a motion for summary judgment or for a directed verdict, a plaintiff seeking damages for a violation of § 1 must present evidence ‘that tends to exclude the possibility’ that the alleged conspirators acted independently.” (quoting the Court’s 1984 decision in Monsanto). We are not going to let juries flip coins: if the plaintiff can’t do more than just assert agreement, if the plaintiff can’t with evidence exclude the possibility that the defendants were acting independently, the plaintiff loses, and indeed, the judge must never let the case go the jury.

But Matsushita’s standard was announced in the context of summary judgment, after the plaintiff had had the opportunity to conduct discovery. Discovery is what lets the plaintiff get at the underlying facts not available to her when the complaint is drafted and that lets her move beyond an uninformative assertion of legal liability—“negligently—to proof of the underlying facts that demonstrate liability—the location of the sippy cup. That evidencde is available only to the defendant, and the lesson of Form 9 is that while we make plaintiffs plead the facts that are available to them without discovery, we don’t make plaintiffs plead facts that are only available to the defendant. This isn’t the framing of Form 9 that we see in yesterday’s transcript, but it seems to match most naturally with Form 9 itself.

The overall question of managing antitrust complaints is a bigger one. Justice Breyer (at page 33 of the transcript) is correctly concerned that vague complaints can be used as fishing expeditions, though do note the plaintiff proposed phased discovery starting with whether an agreement existed (see page 54 of the transcript). And we need to figure out the right mix of private lawsuits and government procedures, especially the use of civil investigative demands, though that issue appeared yesterday only briefly in rebuttal (at pages 56-57 of the transcript) and yesterday’s argument doesn’t give us any sense of how the Court will consider that issue.

But if we are just reading Form 9, as the Court wanted to do yesterday, just asserting that which the plaintiff can’t know in drafting the complaint appears to be enough and antitrust plaintiffs will never have direct knowledge without discovery of the best-kept conspiracies. If the plaintiff can just say “negligently” for the accident on Boylston Street, just asserting agreement may turn out to be enough for Section 1 claims.

[Disclosure: The Law School has received funding in the past from the parent corporation of one of the defendants in this case and may continue to do so now.]

Comments

[Alex]

Just a nitpicky comment - there is a typo in your post, Matsushita was decided in 1986

[Randy Picker]

Thanks. Yes, if would have been hard for them to quote Monsanto (1984) in 1976.

[Crank]

Of course, as a matter of policy, if the pedestrian only knows that she was hit by a car and assumes negligence, then it is questionable whether she should be filing a lawsuit at all. Which, when you think about it, applies to a lot more types of lawsuits than just auto accidents.

[Marc]

Just a quick you-might-be-vaguely-interested point on telephonese (from somebody who recently left that field for law school). We generally used RBOC for "real big old carrier" or "real big old company." Less official, true, but far more descriptive.

[Joan A. Conway]

Several years ago I came across the same kind of intake process that used efficiency for due process requirements in civil matters. Granted criminal conduct requires an investigation that gets to the point of due process as quickly as it can, while under the criminal procedures.

But while civil conduct requires an investigation that tries to alleviate the harm or injury efficiently and without arriving at procedural due process, under the scope of a Section 504 (Rehabilitations Act) civil administrative process, and also at the lower court level.

Therefore, I can say, now without completely reading the post, due to performing this exercise at my neighborhood library and under the pressure of the clock, that any negligence associated with efficient procedures, requiring considerations under the state's theories of contributory negligence or compensatory negligence, during an intake process resulting in any settlement, and in the alternative, a final decision by an administrator denies procedural due process required by the Fourth, and the Fourteenth Amendment of U.S. Constitution, for unreasonable restrain. Privileges and Immunities Clause. Logan vs. Zimmerman Brush Co.

It simply can be said, that the procedural jurisdiction injustice that resulted in this matter is unfortunately out-of-the-orbit of the policeman's investigation, and should have had his desk commander's oversight to avoid the appearance of arbitrary state action and intentional conduct.

I will finish reading this at home and comeback to finish it another day, if I have neglected anything in the comment, since I can and I am not required to do more!

But a criminal investigation does require procedural due process based on the facts supported by the law.

[Joan A. Conway]

What a difference a New Year makes!

Happy New Year bloggers.

An Aside Note:

I found an opportunity to do my first "Good Deed" for the New Year. It occurred on the Epiphany, January 6, 2007, when an attractive 40ish black female carrying Xmas wrapped packages bent down to rest them on the sidewalk to protest getting a parking ticket in front of a neighborhood movie theatre about 4:29 P.M.

She spoke about the injustice of getting a ticket for parking, when she had 9 minutes left on the parking meter and thought the meter man, instead of meter woman, was out to get her to me, an older civil rights white woman, a Sippy Cup!

She then turned to me to inquire how she could prove the matter in court very politely?

I of course responded that she had me!

And in addition, "I would do her a favor," after reading the meter and seeing 9 minutes left on the clock. "I would do her a good deed!"

I proceeded to give her my business card and swapped her name and phone number before departing.

As I noticed she was aptly named "Louise."

God has spoken.

Return to the subject matter:

After reading "Twombly Tea Leaves on Boylston Street" at home, I see that the above comparison suffers from competitive markets information exchanges that promote competiton, while, by comparison sake, in oligopolitistic markets they depress competition.

The Regional Bell Operating Companies are so dominant as to give rise to unfairness.

They in essence have blocked and "prevented entry in their respective local telephone and/or igh speed internet service markets and therefore, joined in a conspiracy to block entry of phone served of public convenience, a necessity to all potential competitors."

In recent years there have been efforts to promote more competition, and to reduce the amount of regulation in many of these industries.

Hence, a "Sippy Cup" can be found in the Wednesday, January 3, 2007, news article in the Chicago Sun Times, "FCC makes wrong call for consumers," when it states: "The phone industry got its special Christmas wish to get a license to deploy its system based on profit, not parity."

"The result will put the phone giants on a fast track to profits, while all but their self-defined "high-end" customers will be left in the slow lane or without service altogether."

"Adding insult to injury, the FCC proposes to extend this ruling to all video service providers once they renew their franchises. Rather than holding companies accountable on a level playing field, the FCC lowers the regulatory bar, cuts public benefits and starts the descent down a slippery slope, or provides its challengers a "Sippy Cup."

"The FCC's stealth move leaves us shaking our heads in disbelief. How is it that three out of five appointed members of the FCC have the power to usurp the authority of 485 elected members of Congress? Peter Skosey, board chairman, CAN TV Chicago."

It is the conduct of the Defendant(s), and not the Agreement, as to its legality of the condcut that creates a sham exception - since they are essentially in the crucial control of evidence and have intentionally withheld it from the Agreement.

This affects the public interest and is subject to varying degrees of regulation by state and federal agencies.

Telephone(s) are permitted to compete within the varying limits set by the various regulatory commissions. Regulation rather than competition is relied upon to protect the public interest.

Trucking Unlimited, Noerr case 1961: Res Ipsa Loquitur, and Boyd v. Travelers, Ins. Co. - Spoliation of Evidence. 42 U.S.C. Section 1985, 1986, and 1988..."Best-Kept Conspiracies."

Now the FCC is promoting more competition and reducing its regulation as its mode of operation. A profit motive for some attorneys.

[Harry Stone]

Great blog you have, i am doing a study on this subject and i fund some great information on your site

Thank you for that

Harry Stone

[Joan A. Conway]

Thank you very much. I appreciate the praise, since I am a new blogger and learning law. I have read about 4 text books so far on the law. The latest is Constitutional Law. I must have about 12 text books someone dumped in front of a used book store one day ago time ago. I am now making use of these text books. Although they are not current text books, there is a wealth of information in them. I hope to receive a National Registration Attorney Number in the near future, before May 25, 2008. I turn 70 years of age on April 26, 2008. This will be a great gift. I have had licenses as a NYSE Series 7 Stockbroker, 1994, Illinois CPA, 1990, and Illinois Real Estate Salesperson, 1976 (?). I have been involved with the Illinois Regulating Commission on other matters concerning coin operated telephones a decade ago.

Again thank you. It was kind.

[Joan A. Conway]

Thank you very much. I appreciate the praise, since I am a new blogger and learning law. I have read about 4 text books so far on the law. The latest is Constitutional Law. I must have about 12 text books someone dumped in front of a used book store one day ago time ago. I am now making use of these text books. Although they are not current text books, there is a wealth of information in them. I hope to receive a National Registration Attorney Number in the near future, before May 25, 2008. I turn 70 years of age on April 26, 2008. This will be a great gift. I have had licenses as a NYSE Series 7 Stockbroker, 1994, Illinois CPA, 1990, and Illinois Real Estate Salesperson, 1976 (?). I have been involved with the Illinois Regulating Commission on other matters concerning coin operated telephones a decade ago.

Again thank you. It was kind.

[satellite DSL]

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