A "plausible" explanation of pleading standards: Bell Atlantic Corp. v. Twombly.

• Author: Tice, Saritha Komatireddy

Rule 8(a)(2) of the Federal Rules of Civil Procedure requires that a plaintiff's complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief." (1) Fifty-one years ago, in Conley v. Gibson, (2) the Supreme Court unanimously declared 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." (3) Last term, in Bell Atlantic Corp. v. Twornbly, (4) the Court called into question this mantra, holding that plaintiffs alleging an antitrust conspiracy under section 1 of the Sherman Act (5) must allege "some factual context suggesting agreement." (6) In requiring that plaintiffs plead "enough facts to state a claim to relief that is plausible on its face," (7) the Court issued a broad decision that appears to tighten the reins on pleading standards. The more stringent approach in Twombly signals a growing hostility toward litigation and a shift away from the liberal Conley mindset. Because Twombly's holding is somewhat ambiguous, however, lower courts and plaintiffs' lawyers have significant leeway to tease out the meaning of "plausibility" in different contexts.

In 1984, telephone conglomerate AT&T underwent divestiture, leaving behind a number of regional service monopolies. (8) Congress then passed the Telecommunications Act of 1996 to facilitate market entry and encourage these regional service providers to compete with one another. (9) In 2003, a class of subscribers to local telephone and high-speed Internet services brought suit against the regional service providers, alleging violation of section 1 of the Sherman Act, (10) which prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States." (11) The plaintiffs' complaint alleged that the regional service providers conspired to restrain trade by inhibiting the growth of their competitors and by agreeing to refrain from competing against one another, as indicated by their common failure to pursue attractive business opportunities in one another's territories. (12) To support their conspiracy claim, the plaintiffs asserted facts showing parallel behavior, but no facts showing concerted action or actual agreement. (13)

The United States District Court for the Southern District of New York dismissed the complaint. (14) Citing precedent, the court noted that plaintiffs alleging conspiracy "must always assert facts [in their complaint] that, if true, support the existence of a conspiracy, such as motivation or conduct that lends itself to an inference of an agreement." (15) The district court concluded that plaintiffs' complaint in the instant case "provide[d] no reason to believe that defendants' parallel conduct was reflective of any agreement." (16)

The United States Court of Appeals for the Second Circuit reversed the district court's dismissal. (17) The Second Circuit rejected the notion that the plaintiffs were required to plead facts, and instead reiterated the standard set forth in Conley v. Gibson (18) 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." (19) The court concluded that the plaintiffs' allegations met this standard and thus were "sufficient to give the defendant fair notice of what the ... claim is and the grounds upon which it rests." (20)

The Supreme Court granted certiorari and reversed. Writing for the Court, (21) Justice Souter asserted that Conley's "no set of facts" language has "earned its retirement," (22) holding that plaintiffs must plead "enough facts to state a claim to relief that is plausible on its face." (23) Justice Souter conceded that allegations of parallel conduct are "consistent with conspiracy," but added that, without more, such allegations are "just as much in line with a wide swath of rational and competitive business strategy unilaterally prompted by common perceptions of the market." (24) Expressing alarm over potentially exorbitant discovery costs, and concomitant in terrorem increases in settlement values, (25) the majority contended that a plaintiff's obligation "requires more than labels and conclusions ... and a formulaic recitation of the elements of a cause of action." (26) Instead, a complaint must contain "enough [additional] factual matter (taken as true) to suggest that an agreement was made." (27) "Because the plaintiffs here [had] not nudged their claims across the line from conceivable to plausible," the Court concluded, "their complaint must be dismissed." (28)

Justice Stevens dissented, (29) contending that the plaintiffs had properly set forth an allegation that defendants entered into an agreement and that this allegation was in itself sufficient in "describing unlawful conduct." (30) Justice Stevens invoked the history of the rules to argue that "the pleading standard the Federal Rules meant to codify does not require, or even invite, the pleading of facts." (31) Indeed, Justice Stevens characterized the majority's plausibility requirement as "a question not of notice but of proof," properly relegated to later stages of litigation. (32) Although Justice Stevens acknowledged the majority's concerns about discovery costs, he contended that such concerns would be best addressed through means such as careful judicial management of cases, not a revised interpretation of the Federal Rules. (33) Justice Stevens concluded, "I would not rewrite the Nation's civil procedure textbooks and call into doubt the pleading rules of most of its States without far more informed deliberation as to the costs of doing so." (34)

The Court's decision in Twombly is an important change. It reflects a significant shift away from the litigation-promoting mindset embodied in Conley and instead solidifies what has been a growing hostility toward litigation. The decision, however, gives lower courts and plaintiffs little guidance on the future of pleading standards, leaving lower courts to define precisely the meaning of the "plausibility" standard and requiring plaintiffs simply to divine what is expected of them.

The implications of Twombly extend far beyond the field of antitrust. The decision reaches toward the foundations of what it means for a civil complaint to be sufficient. Many portions of the opinion signal its broad reach. First, during oral arguments, various Justices referred to Form 9 in the Appendix of the Federal Rules, (35) indicating their concern with model pleading across subject matter. (36) Second, in the opinion itself, the Court explicitly cited the long-established Conley standard, the traditional standard for the sufficiency of any type of complaint. The Court then asserted that Conley had "earned its retirement." (37) Third, the Court cited to Twombly as its primary authority for pleading standards in a later opinion, Erickson v. Pardus, (38) even though that case involved a prisoner's civil rights claims. (39) Fourth, lower courts have confirmed and heeded these signals, (40) citing Twombly in an array of litigation contexts ranging from breach of contract (41) to race discrimination (42) to Title VII retaliatory discharge. (43)

Twombly furthermore represents a significant change in basic pleading standards, as evidenced by the decision's internal logic. The Court essentially purported to be dismissing a complaint that did not directly allege an agreement to conspire. (44) Accepting the Court's assumptions, (45) the circumstances invite the question: Why did the plaintiffs not simply amend their complaint to allege agreement directly, streamlining their argument and using Form 9 as a model? (46) Barring attorney incompetence, the answer must be that the plaintiffs did not believe that such an amended pleading would have succeeded.

Indeed, if an alternative, simplified complaint directly alleging agreement would have succeeded, then the Twombly litigation would have been spectacularly wasteful. Future plaintiffs would simply amend their complaints, and none of the objectives the Court aimed to promote through Twombly, such as less discovery abuse and fewer frivolous claims, (47) would follow. The Court would likely not have engaged in an exercise this pointless. (48)

Given that the plaintiffs were likely correct in their belief that an...