Chapter VII. Pleadings and Procedural Issues

• Pages: 129-160

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CHAPTER VII

PLEADINGS AND PROCEDURAL ISSUES

This chapter focuses on the practical issues of pleading and

procedure facing the litigator who encounters or advances a state action

argument. The plaintiff’s counsel anticipating a state action issue should

prepare at the outset for the inevitable motions because the state action

defense may bar an antitrust claim at its inception. For the same reason,

defense counsel should carefully assess the best means for presenting the

state action defense, whether by a motion to dismiss or a motion for

summary judgment. Whether state, municipal, or private action is at

issue primarily determines the stage in the litigation at which the court

may resolve the state action issue.

A. Initial Pleadings

1. Complaint

Plaintiff’s counsel who anticipate a state action defense should, if

possible, plead facts that will prevent a defendant from succeeding on a

motion to dismiss based on the state action doctrine. Of course, a

plaintiff faced with a state action argument in a motion to dismiss may

amend the complaint within 21 days after service of the motion and

attempt to allege facts to overcome the defense once it is raised.1 So long

as the plaintiff has not amended once already, the plaintiff also may

amend within 21 days after service of the answer.2 Otherwise, the

plaintiff must seek consent from the defendant or leave of court to amend

the complaint.3 Because the court may deny leave to amend, counsel

1. FED. R. CIV. P. 15(a)(1)(B); see also, e.g., James V. Hurson Assocs. v.

Glickman, 229 F.3d 277, 282-83 (D.C. Cir. 2000) (holding that motion to

dismiss is not a “responsive pleading” within the meaning of Rule

15(a)(1)(A)).

2. FED. R. CIV. P. 15(a)(1)(B).

3. FED. R. CIV. P. 15(a)(2).

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who choose not to plead preemptively against a state action defense are

at risk. For example, in Nursing Registry v. Eastern North Carolina

Regional Emergency Medical Services Consortium,4 the court denied a

plaintiff’s motion for leave to amend its complaint to address the state

action defense raised by the governmental defendants.5 The court held,

in part, that the plaintiff’s proposed amended complaint was as defective

as its original complaint in that it failed to allege facts sufficient to defeat

the governmental defendants’ claim to state action protection; thus,

amendment would have been futile.6 In light of these risks, plaintiff’s

counsel should consider anticipating the state action defense in the

original complaint. Among the allegations pleaded by plaintiffs that

have served to overcome a motion to dismiss based on state action

protection are:

• Facts sufficient to show that there was no clearly articulated state

policy authorizing the restraint;7

• Facts sufficient to show that a private defendant’s conduct is not

actively supervised;8 and

• Facts sufficient to show that a private defendant usurped the

decision-making process of a governmental body.9

Moreover, in the absence of a Supreme Court opinion expressly

adopting or rejecting a “market participant” exception to the state action

4. 959 F. Supp. 298 (E.D.N.C. 1997).

5. Id. at 310.

6. See id. at 309-10. Other courts have reached similar conclusions, denying

plaintiffs leave to amend because the proposed amendments would not

defeat the defendants’ state action immunity. See, e.g., PTI, Inc. v. Philip

Morris Inc., 100 F. Supp. 2d 1179, 1209 (C.D. Cal. 2000); Bonollo

Rubbish Removal v. Town of Franklin, 886 F. Supp. 955, 966 (D. Mass.

1995).

7. See, e.g., Apani Sw., Inc. v. Coca-Cola Enters., 128 F. Supp. 2d 988, 999-

1000 (N.D. Tex. 2001) (considering claims against a private defendant) ;

Fisichelli v. Town of Methuen, 653 F. Supp. 1494, 1499-1502 (D. Mass.

1987) (considering claims against a municipal defendant).

8. See, e.g., Ticket Ctr. v. Banco Popular de P.R., 441 F. Supp. 2d 354, 358

(D.P.R. 2006); see also Apani, 128 F. Supp. 2d at 1000 (finding that a

nongovernmental defendant was not entitled to state action immunity

because its conduct was supervised by a municipality, not the state).

9. See, e.g., Mercatus Group v. Lake Forest Hosp., 528 F. Supp. 2d 797, 814

(N.D. Ill. 2007).

Pleadings and Procedural Issues 131

doctrine,10 it may be an exception worth pleading initially in appropriate

cases. Plaintiff’s counsel, therefore, should consider whether pleading

facts to support the market participant exception is justified.

2. Defendant’s Response

Although a defendant may elect to move to dismiss in lieu of

answering,11 defense counsel should keep in mind that even after the

Supreme Court reformulated the pleading standard required by Rule 8(a)

in Bell Atlantic Corp. v. Twombly,12 many district courts continue to

view with skepticism motions to dismiss for failure to state a claim.13 As

a tactical matter, defense counsel who seek dismissal based on state

action grounds risk not just an adverse decision, but a judicial opinion

highlighting for the plaintiff the facts the trial judge considers important

to a finding that state action protection attaches. In cases where a

municipal or executive agency defendant can point to a clearly

articulated state policy justifying its conduct, however, defense counsel

should give serious consideration to filing a motion to dismiss.14

10. See City of Columbia v. Omni Outdoor Adver., 499 U.S. 365, 374-75

(1991) (stating in dictum that certain language in Parker “simply

[clarifies] that [state action] immunity does not necessarily obtain where

the State acts not in a regulatory capacity but as a commercial participant

in a given market”). See Chs. IV.C.2 and VI.C for more detailed

discussions of a market participant exception to the state action doctrine.

11. FED. R. CIV. P. 12(b). In the event that the defendant moves to dismiss,

and the plaintiff amends the complaint in response, the defendant should

file another motion to dismiss to meet the plaintiff’s additional

allegations. See Adams v. Quattlebaum, 219 F.R.D. 195, 197 (D.D.C.

2004); see also Turner v. Kight, 192 F. Supp. 2d 391, 397 (D. Md. 2002)

(holding that an amended complaint supersedes the original complaint

and renders moot any pending motions to dismiss the original complaint).

12. 550 U.S. 544 (2007). See also Ashcroft v. Iqbal, 129 S. Ct. 1937, 1953

(2009) (clarifying that Twombly pleading standard applies to all civil

actions, not just antitrust cases).

13. See, e.g., Maxwell v. RadioShack Corp., 547 F. Supp. 2d 606, 609-10

(N.D. Tex. 2008); Cunningham v. Offshore Specialty Fabrications, 543 F.

Supp. 2d 614, 619-20 (E.D. Tex. 2008); Glenbrook Capital L.P. v. Kuo,

525 F. Supp. 2d 1130, 1135-36 (N.D. Cal. 2007); Graphia v. Balboa Ins.

Co., 517 F. Supp. 2d 854, 856 (E.D. La. 2007).

14. See Town of Hallie v. City of Eau Claire, 471 U.S. 34, 46-47 (1985).