Yogi Berra and the Federal Lawsuit

The Supreme Court’s dismissal of an antitrust lawsuit Monday in Bell Atlantic v. Twombly calls to mind Yogi Berra’s advice that “if you come to a fork in the road, take it.”

The Supreme Court often takes Yogi Berra’s advice one step further. Confronted with a choice between two inconsistent alternatives, it often chooses both, to the bewilderment of lawyers and judges alike.

It did that in its 1957 decision in Conley v. Gibson. In that case, the Supreme Court first said that even at the start of a lawsuit, the plaintiff’s complaint must give the defendant “fair notice” of what the suit is about, since that is required by Rule 8(a)(2) of the Federal Rules of Civil Procedure.

But then it contradicted itself by saying that a defendant who wants to get a lawsuit dismissed prior to discovery has the almost impossible burden of showing that “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.”

To prove that, the defendant couldn’t just rely on the lack of facts in plaintiff’s complaint, but had to also negate the theoretical possibility that the plaintiff could uncover facts consistent with his complaint in the future through discovery.

That meant it was hard to dismiss a lawsuit at the earliest possible phase — the pre-trial motion-to-dismiss phase — which resulted in weak lawsuits taking longer to dismiss. (A defendant in a federal discrimination case, for example, will typically spend as little as $25,000 to handle a case that is dismissed on a pre-trial motion to dismiss, at least $75,000 to handle a case that goes through full-blown discovery before being dismissed on summary judgment, and at least $250,000 to handle a case that is tried to a jury).

Many lower courts, however, long required some minimal amount of supporting factual allegations in a plaintiff’s complaint, citing Rule 8(a)(2)’s requirement of “fair notice” as placing some limits on a plaintiff’s ability to sue based on “bare allegations.”

The Supreme Court has now followed this practice as well in its May 21 decision in Bell Atlantic v. Twombly. The court threw out an antitrust lawsuit which was based heavily on conjecture, ruling that the defendant business couldn’t just be sued based on parallel business practices and common membership in a trade association. Instead, the plaintiffs had the burden of providing enough specific factual allegations in their complaint to make their conspiracy allegations against the defendants plausible and give them “fair notice” of the basis of the claims against them.

Two justices dissented in Twombly, relying on the Supreme Court’s 2002 decision in Swierkiewicz v. Sorema, which permitted a plaintiff to rely on conclusory allegations in his complaint in an employment discrimination case. But as I have explained elsewhere, that decision was based on the fairly simple nature of the violation alleged (differential treatment of a man based on his age and national origin) ; did not dispense with the general requirement of fair notice, even in discrimination cases; and was not interpreted by most lower courts as giving plaintiffs in general carte blanche to bring lawsuits based on conclusory allegations.

As I have pointed out, the dissent in the Twombly case wrongly places great reliance on the defendants’ mere membership in a trade association where they supposedly had the opportunity to conspire together. Basing liability on trade association membership is contrary to the First Amendment’s freedom of association, which protects a company’s right to belong to a trade association.

Legal commentators disagree over how important this decision. Harvard Law Professor Einer Elhauge says it’s not a big change from the way most courts already handle lawsuits, although he admits that another legal commentator has called the Twombly decision “the most practically significant case of this” year.

By contrast, Ted Frank of the American Enterprise Institute says it’s a big deal and could result in a lot weak lawsuits being dismissed, at an early stage of litigation. He says that although the decision won’t affect principles of antitrust law, it will make a “huge difference” procedurally in courts’ ability to dismiss weak lawsuits.