Thursday, May 24, 2007

The End of Notice Pleading?

Monday's Supreme Court decision in Bell Atlantic Corp v. Twombly will be scrutinized carefully by both civil procedure scholars and antitrust scholars for years to come. Indeed, as a proceduralist but not an antitrustite, I can attest that the procedure side of the scrutiny has begun in earnest, at least as judged by the level of buzz on the civpro faculty list. For those of you who have more interesting things to do with your lives, here's a very capsule summary: The plaintiffs brought a class action against local telephone line operators, alleging that in violation of the Sherman Act, the local phone companies had colluded not to compete against one another in their respective areas. The complaint did not directly allege facts showing an actual agreement but instead included the bare allegation of a conspiracy and parallel conduct by the defendants which, the plaintiffs alleged, gave rise to an inference of an agreement. The Supreme Court held that this complaint was insufficient to survive a motion to dismiss, even under the liberal pleading standard of Federal Rule of Civil Procedure 8(a)(2), which requires only “a short and plain statement of the claim showing that the pleader is entitled to relief.” The civil procedure mavens are abuzz because the case thus appears inconsistent with two relatively recent Supreme Court decisions rejecting a "heightened pleading standard"---i.e., a requirement that the plaintiff allege specific facts---except in the small number of circumstances expressly set forth in Rule 9.

Yet Justice Souter's opinion for the Twombly Court specifically disavows this reading. He states in footnote 14:
In reaching this conclusion, we do not apply any “heightened” pleading standard, nor do we seek to broaden the scope of Federal Rule of Civil Procedure 9, which can only be accomplished “ ‘by the process of amending the Federal Rules, and not by judicial interpretation.’ ” Swierkiewicz v. Sorema N. A., 534 U. S. 506, 515 (2002) (quoting Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U. S. 163, 168 (1993)). On certain subjects understood to raise a high risk of abusive litigation, a plaintiff must state factual allegations with greater particularity than Rule 8 requires. Fed. Rules Civ. Proc. 9(b)–(c). Here, our concern is not that the allegations in the complaint were insufficiently “particular[ized]”, ibid.; rather, the complaint warranted dismissal because it failed in toto to render plaintiffs’ entitlement to relief plausible.
The rough consensus coalescing among proceduralists seems to be that Souter's footnote 14 is simply false---not in the sense that the Court intends henceforth not to be bound by Swierkiewicz and Leatherman but in the sense that there's no way to understand the decision if it doesn't apply a heightened pleading standard. This emerging consensus is right but there may be a way to distinguish the case so that it does not do enormous damage to the 70-year-old regime of notice pleading in the federal courts.

Consider an analogy. Suppose that Nine Fingers Nate brings a tort suit against a surgeon who unsuccessfully attempted to reattach his severed thumb. The complaint includes a bare allegation of negligence and also makes clear that Nate will be relying on res ipsa loquitur. His factual allegations, however, merely state that the surgeon was unable to reattach the thumb. Applying the standards of the Federal Rules (let's say it's a diversity case), the district court would be right to grant a motion to dismiss because an allegation that the surgery did not achieve its desired outcome is hardly enough to support res ipsa. There are plenty of other reasons besides negligence for the surgery's failure. If the complaint makes clear that res ipsa is one of two possible theories of recovery, however, the other being direct proof of negligence, then dismissal of the entire complaint would be unwarranted. After all, a bare allegation of negligence is sufficient under the Federal Rules, as Form 9 makes clear ("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.")

Accordingly, if the Twombly complaint meant the case to stand or fall on the allegation of parallelism, then the Court was right to affirm its dismissal. Like an unsupported claim of res ipsa, allegations of parallelism don't imply conspiracy absent unusual circumstances or additional factors. But if the Twombly plaintiffs instead alleged parallelism as simply one theory, then the Court should have permitted discovery to go forward based on the separate, albeit bare, allegation of conspiracy. The Court's bottom line decision could, therefore, be correct if it could be read as applying only in those cases in which the plaintiffs' complaint makes plain the intention to rely on parallelism as the sole basis for proving a Sherman Act § 1 claim.

Unfortunately, however, much of the Court's language makes clear that even absent any discussion of parallelism in the complaint, a naked allegation of conspiracy would be inadequate. The Court states, for example: "An allegation of parallel conduct is thus much like a naked assertion of conspiracy in a §1 complaint: it gets the complaint close to stating a claim, but without some further factual enhancement it stops short of the line between possibility and plausibility of entitlement to relief."

There is almost no way to reconcile this language with Swierkiewicz, Leatherman, Rules 8 and 9, and Form 9. Perhaps all the Court means is that the Twombly complaint lacks even the sort of factual claims as one sees in Form 9---i.e., the equivalent of the allegation about the date and Boylston Street---but the complaint Twombly complaint itself does contain such details, as the dissent notes. So, the protests notwithstanding, the majority does appear to be requiring more fact pleading than everyone previously thought was required.

To be sure, the outcome of Twombly is easily reconcilable if one adopts the analogy to res ipsa I've suggested above. At least one hopes that the Court will be persuaded by this or some other distinction in the future so that Twombly can be treated as an antitrust case rather than a pleading case. But in the meantime it will likely do great damage in the lower courts. Plaintiffs' lawyers who hope to escape the newly heightened pleading requirement that the defense bar will now seek to impose across the board would be well advised to invoke Swierkiewicz and Leatherman, as well as the extremely important principle that when the Supreme Court does not expressly reject a precedent---as it most certainly did not reject Swierkiewicz and Leatherman in Twombly---lower courts must apply the precedent, even if subsequent cases appear to weaken it. (That principle is articulated in Rodriguez de Quijas v. Shearson Am Exp.)