Last summer, in Bell Atlantic Corp. v. Twombly, 550
In Twombly, the plaintiffs alleged a conspiracy and thus violation of §1 of the Sherman Act based on the Baby Bells’ failure to engage in meaningful competition in each other’s markets. The plaintiffs’ complaint described “parallel conduct” which had the effect of preventing competition. The District Court dismissed the complaint for failure to state a claim upon which relief can be granted, observing that even “conscious parallelism” is not enough to constitute conspiracy under the Sherman Act. (Working individually and based on their own assessments of what makes business sense, companies may engage in conduct that is both “parallel” and has the effect of preventing competition. That does not mean that they have conspired to prevent competition.) The Second Circuit reversed the lower court, holding that under existing pleading standards, the plaintiffs were not required to plead facts excluding the possibility of independent conduct just to keep their action alive and move on to discovery. The Supreme Court reversed the judgment of the Second Circuit and remanded for further proceedings.
Now that I’ve weaved my way through the dark, frightening and probably-still-confusing Woods of Antitrust, on to the procedural points that could affect ADR.
For a long time, Civil Procedure professors (like me) have taught our students about our federal courts’ liberal notice approach to pleading. The high water mark of this approach was announced in Conley v. Gibson, 355 U.S. 41 (1957), when the Court wrote: “[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.” (Emphasis added.) Notice the burden that this places on the defendant in making a motion to dismiss. In Twombly, the current Supreme Court declared that this “famous observation has earned its retirement. The phrase is best forgotten as an incomplete, negative gloss on an accepted pleading standard…” Instead, the Court emphasized that legal conclusions (like the term “conspiracy”) are not sufficient to meet pleading standards, and “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Here, because the plaintiffs relied entirely on factual allegations of parallel conduct and lacked any additional allegations that made it more likely that the Baby Bells’ conduct was the result of an agreement rather than their individual choices, the claim of conspiracy was not sufficiently plausible and had to be dismissed.
Courts and commentators are still grappling with the reach of Twombly. Should its effect be confined to the relatively narrow context of the Sherman Act or should it be understood to have a broader application? Let’s imagine that the latter interpretation prevails, and liberal notice pleading becomes less liberal. Many people feel wronged and suspicious at some point in their lives. Some of these people become plaintiffs in civil rights, employment, consumer or class action lawsuits. At the point that they sue, they are unlikely to have access to the evidence that will make it clear whether or not they are entitled to relief. Their pleadings will reflect their suspicions about why things happened as they did. They need discovery to gain access to necessary information (often in the defendants’ possession). Of course, they also hope for resolution.
Today, growing numbers of these people are forced to enter into arbitration rather than litigation. Why? Because repeat players value arbitration’s advantages over litigation–no or reduced discovery, faster dispositions, lower costs, more predictable outcomes. Similarly, some people choose or are forced to mediate. Again, why? Because they or their lawyers or the courts value mediation’s advantages over litigation—no or reduced discovery when mediation is held early, faster dispositions, lower costs, chosen and thus more predictable outcomes. Both arbitration and mediation are valued primarily for their advantages in comparison to litigation.
If pleading standards are tightened, though, dismissal at the pleading stage becomes more likely for those cases in which the plaintiffs are least likely to have access to defendants’ information and most reliant on discovery—e.g., civil rights, employment, consumer and class action cases. Fewer of these lawsuits will proceed to discovery, their disposition will be faster, and costs will be less. Then how attractive will arbitration and mediation be in these types of cases, especially for defendants and the courts? The discussion regarding mediation’s and arbitration’s other values may then take on more meaning.