Another Twombly/Iqbal Victory for Plaintiffs: SCOTUS Denies Certiorari for Digital Music Price-Fixing Case

If you’re a reader of this blog, you’re undoubtedly familiar with Bell Atlantic v. Twombly and Ashcroft v. Iqbal, a pair of Supreme Court cases which altered the pleading standards applicable to civil cases filed in federal court.

Defense lawyers have jumped all over those two opinions in an attempt to dismiss lawsuits — particularly complex commercial class actions, like antitrust cases — before any discovery can be taken. Every lawsuit, they claim, no matter how detailed and compelling, is "implausible" under Twombly and Iqbal. I taught CLEs to help other trial lawyers defeat those arguments.

Back when the Iqbal opinion first came out, I wasn’t impressed. Sure, the Supreme Court added the word "plausible" to the Rule 8 standard, but frankly I didn’t think Twombly or Iqbal would make Rule 8 and Rule 12(b)(6) any more dispositive than they already were. Before either of those cases were decided, if a judge read a plaintiff’s complaint and thought that the claim was "implausible," they would dismiss it under Fed.R.Civ.P. 12(b)(6) for failing to state a claim upon which relief could be granted. Twombly and Iqbal simply codified a practice that was already widespread in the federal judiciary.

That’s not to say I think the opinions do nothing — by way of their vague, ambiguous and amorphous language, they confuse a lot of judges into arbitrarily deeming certain allegations to be "conclusions" instead of "facts" (and even Judge Posner can’t figure out the "plausibility v. probability" distinction) — but the underlying legal principles are the same.

I said as much at the time. Time has proven me correct.

Almost exactly a year ago I posted Second Circuit Revives Digital Music Price-Fixing Case, Takes A Bite Out Of Twombly, noting a Second Circuit opinion which held:

Although the Twombly court acknowledged that for purposes of summary judgment a plaintiff must present evidence that tends to exclude the possibility of independent action, 550 U.S. at 554, and that the district court below had held that plaintiffs must allege additional facts that tended to exclude independent self-interested conduct, id. at 552, it specifically held that, to survive a motion to dismiss, plaintiffs need only “enough factual matter (taken as true) to suggest that an agreement was made,” id. at 556; see also 2 Areeda & Hovenkamp § 307d1 (3d ed. 2007) (“[T]he Supreme Court did not hold that the same standard applies to a complaint and a discovery record . . . . The ‘plausibly suggesting’ threshold for a conspiracy complaint remains considerably less than the ‘tends to rule out the possibility’ standard for summary judgment.”).

Defendants next argue that Twombly requires that a plaintiff identify the specific time, place, or person related to each conspiracy allegation. This is also incorrect. The Twombly court noted, in dicta, that had the claim of agreement in that case not rested on the parallel conduct described in the complaint, “we doubt that the . . . references to an agreement among the [Baby Bells] would have given the notice required by Rule 8 . . [because] the pleadings mentioned no specific time, place, or person involved in the alleged conspiracies.” 550 at 565 n.10. In this case, as in Twombly, the claim of agreement rests on the parallel conduct described in the complaint. Therefore, plaintiffs were not required to mention a specific time, place or person involved in each conspiracy allegation. 

The Second Circuit’s opinion was significant. The case was right up Twombly‘s alley — an allegation of an illegal agreement in violation of antitrust laws, the details of which were still known only to the defendants — and so the Second Circuit’s reinstatement of the case dealt a powerful blow to the defense lawyers who had been arguing that Twombly and Iqbal had slammed the courthouse shut on plaintiffs who couldn’t prove their whole case before even filing it.

The record companies in that case weren’t inclined to throw in the towel, so they filed a petition for certiorari to the Supreme Court arguing, as you would imagine, that the Second Circuit failed to follow Twombly and Iqbal.

A funny thing happened yesterday. Tucked in among pages and pages of summary orders at the Supreme Court was this:

10-263
SONY MUSIC ENTERTAINMENT, ET AL. V. STARR, KEVIN, ET AL.
The petition for a writ of certiorari is denied. The Chief Justice and Justice Sotomayor took no part in the consideration or decision of this petition.

The Second Circuit’s opinion thus stands firm. Even after Twombly and Iqbal, all a plaintiff needs to allege, even in a complex antitrust case, is “enough factual matter (taken as true) to suggest" the elements of the claim.

That’s the same as the Third Circuit recently held in In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 314 (3d Cir. 2010) and later applied to all cases, including complex cases, in W. Penn Allegheny Health Sys. v. UPMC, No. 09-4468, (3d Cir. November 29, 2010)(precedential).

In short, the Circuit Courts have taken a hard look at Twombly and Iqbal and have rejected the numerous attempts by big corporations to slam the courthouse doors shut on meritorious cases, and the Supreme Court hasn’t stopped those Courts from setting the record straight.

In celebration, below the fold are some plaintiff-friendly precedential opinions over the last year in various Courts of Appeals (in addition to the Second Circuit and Third Circuit opinions above). 

 * * *

Fourth Circuit:

"[T]o survive a motion to dismiss, the complaint must ‘state[ ] a plausible claim for relief’ that ‘permit[s] the court to infer more than the mere possibility of misconduct’ based upon ‘its judicial experience and common sense.’ Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950, 173 L. Ed. 2d 868 (2009). In this regard, while a plaintiff is not required to plead facts that constitute a prima facie case in order to survive a motion to dismiss, see Swierkiewicz v. Sorema N.A., 534 U.S. 506, 510-15, 122 S. Ct. 992, 152 L. Ed. 2d 1 (2002), ‘[f]actual allegations must be enough to raise a right to relief above the speculative level,’ Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). See also Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009)."

Coleman v. Md. Court of Appeals, 626 F.3d 187 (4th Cir. 2010).

Seventh Circuit:

"Prior to Iqbal and Twombly, it was clear that ‘a plaintiff [was] free on appeal to give us an unsubstantiated version of the events, provided it is consistent with the complaint, to show that the complaint should not have been dismissed.’ Dawson v. General Motors Corp., 977 F.2d 369, 372 (7th Cir. 1992) (internal quotation marks and alteration omitted). The question now is whether Iqbal and Twombly narrowed the pleading standard such that this after-the-fact hypothesis of facts is no longer permissible.

We conclude that the Supreme Court’s recent decisions, while raising the bar for what must be included in the complaint in the first instance, did not eliminate the plaintiff’s opportunity to suggest facts outside the pleading, including on appeal, showing that a complaint should not be dismissed. See Twombly, 550 U.S. at 563 (‘[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint.’); McZeal v. Sprint Nextel Corp., 501 F.3d 1354, 1356 n.4 (Fed. Cir. 2007). Therefore, although the plaintiff is required to plead more than bare legal conclusions to survive a motion to dismiss, once the plaintiff pleads sufficient factual material to state a plausible claim–that is, sufficient to put the defendant on notice of a plausible claim against it–nothing in Iqbal or Twombly precludes the plaintiff from later suggesting to the court a set of facts, consistent with the well-pleaded complaint, that shows that the complaint should not be dismissed."

Reynolds v. CB Sports Bar, Inc., 623 F.3d 1143, 1146–47 (7th Cir. 2010).

"Although Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007), and Ashcroft v. Iqbal, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009), require that a complaint in federal court allege facts sufficient to show that the case is plausible, see, e.g., Phillips v. County of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008), they do not undermine the principle that plaintiffs in federal courts are not required to plead legal theories. See Aaron v. Mahl, 550 F.3d 659, 665-66 (7th Cir. 2008); O’Grady v. Village of Libertyville, 304 F.3d 719, 723 (7th Cir. 2002). Even citing the wrong statute needn’t be a fatal mistake, provided the error is corrected in response to the defendant’s motion for summary judgment and the defendant is not harmed by the delay in correction. Ryan v. Illinois Dept. of Children & Family Services, 185 F.3d 751, 764 (7th Cir. 1999)."

Hatmaker v. Mem’l Med. Ctr., 619 F.3d 741, 743 (7th Cir. 2010).

Eighth Circuit:

"Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a ‘short and plain statement of the claim showing that the pleader is entitled to relief.’ Twombly and Iqbal did not abrogate the notice pleading standard of Rule 8(a)(2). Rather, those decisions confirmed that Rule 8(a)(2) is satisfied ‘when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’ Iqbal, 129 S. Ct. at 1949; see Erickson v. Pardus, 551 U.S. 89, 93, 127 S. Ct. 2197, 167 L. Ed. 2d 1081 (2007). However, ‘to survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face.’ Iqbal, 129 S. Ct. at 1949, quoting Twombly, 550 U.S. at 570. A pleading that merely pleads ‘labels and conclusions,’ or a ‘formulaic recitation’ of the elements of a cause of action, or ‘naked assertions’ devoid of factual enhancement will not suffice. Id., quoting Twombly. Determining whether a claim is plausible is a ‘context-specific task that requires the reviewing court to draw on its judicial experience and common sense.’ Id. at 1950."

Hamilton v. Palm, 621 F.3d 816, 817–18 (8th Cir. 2010).

Eleventh Circuit:

"In Twombly, the Supreme Court distinguished ‘plausible’ claims from allegations that were merely ‘conceivable,’ and stated that the Court ‘[did] not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face.’ Id. at 570, 127 S. Ct. at 1974. The Supreme Court explained that a complaint ‘does not need detailed factual allegations,’ but the allegations ‘must be enough to raise a right to relief above the speculative level.’ Id. at 555; 127 S. Ct. at 1964-65. Furthermore, ‘a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.’ Id. at 556, 127 S. Ct. at 1965 (quotation marks omitted).

Subsequently, in Iqbal the Supreme Court clarified that ‘[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’ Id. at , 129 S. Ct. at 1949; see also Watts v. Fla. Int’l Univ., 495 F.3d 1289, 1295-1296 (11th Cir. 2007) (‘The Court has instructed us that the rule ‘does not impose a probability requirement at the pleading stage,’ but instead ‘simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of’ the necessary element.’) (quoting Twombly, 550 U.S. at 556, 127 S. Ct. at 1965)."

Speaker v. U.S. HHS CDC, 623 F.3d 1371, 1380 (11th Cir. 2010).

 

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  • Reggie

    Twombly Iqbal figured out. I think I have it all figured out finally. Here is the layman’s explanation and you lawyers can do the heavy lifting. The fatal flaw with Iqbal’s complaint is that he attacked Aschroft’s and Mueller’s state of mind. To say that the Aschroft and Mueller’s intention was discriminatory was too big of a leap and frankly dangerous and or costly. It would have been different if Iqbal came in direct contact with them and they said something or even someone who worked with them said something or even that someone who worked for someone else down the chain said it was policy. Iqbal had none of this. It was correctly dismissed.
    What is also missing from all of these great papers of on Twombly,Iqbal and Swierkierwicz is the notion of disparate impact. Disparate impact. Here is a definition of disparate impact – “proscribes not only overt discrimination but also practices that are fair in form, but discriminatory in operation. The touchstone is business necessity. . . . [G]ood intent or absence of discriminatory intent does not redeem employment procedures or testing mechanisms that operate as ‘built-in headwinds’ for minority groups and are unrelated to measuring job capability.”
    Disparate Impact seems to escape Twombly and Iqbal, why? Because there is some policy and there is some statistical story. You don’t have to look in the mind of someone. Especially not in the mind’s of men who are saving lives of Americans. Though there may have been a bad policy paper lying around.
    So Iqbal may have been successful by claiming disparate impact of those in SHU and maybe saying that Disparate Impact obviously exists but there is possibly some parallel policy at play. Most likely, the disparate impact would have survived given that there may have been a lot of common criminals housed in Shu but who happen to be Muslim or Middle East origin.
    Twombly failed because of the inferences on inferences without having a transactional event and they had no one to say that there was a meeting. If they simply had enough people to say that they think the meeting was at the Hilton, or the Waldorf Astoria, and put enough players there – well you might have had something. It was correctly dismissed because it didn’t speak to the possibility of a real meeting.
    Swierkiewicz survived and complaints like Swierkiewicz survive because all of the actors or within the transactional events. So that’s it – If the actors are within the transactional events you do not have to infer in discriminatory state of mind – The events tell the story until discovery.
    If you are a Plaintiff – you had better create a transactional complaint where all of the actors are closely linked by dates, times, events, conversations are you may suffer a Twiqbal. With my understanding Swierkiewicz is still good law and that’s the reason why. Excuse my short hand, I am pro se and my writings should be liberally construed :-)