Corporations are fucking you, and anti-trust law is a joke.
Meet: Bell Corp v. Twombly.
“The transparent policy concern that drives the decision is the interest in protecting antitrust defendants — who in this case are some of the wealthiest corporations in our economy — from the burdens of pretrial discovery.”
The pool of massive conglomerate parent corporations got just a little bit smaller last week. Bayer secured its purchase of Monsanto last Tuesday for just under $66 billion and in doing so has potentially created a corporate entity with not just a plurality but, indeed, a true majority share of three of the most important agricultural seed crop markets in America. In Germany, lawmakers have already called on regulators to curb Bayer’s takeover of the U.S. seed giant. We have yet to see American antitrust regulators take hard stances on the buyout but their silence cannot last long.
It will not last long because the seriously problematic merger between Bayer and Monsanto illuminates the deep and corporate-led erosion of antitrust law. Bell Corp. v. Twombly is a case that is maybe as significant, even, as Citizens United insofar as it enables corporate entities to function with impunity, yet it’s hardly discussed in mainstream political discourse. The case forever changed the face of American antitrust law and, ultimately, federal civil procedure generally via the subsequent case of Iqbal v. Ashcroft. Twombly proves a stern reminder that the most insidious manner in which corporations legally maneuver otherwise morally offensive acts tends to lay buried in dense procedural case law.
Rule 8 is an important one. It was no small thing for the court to heighten pleading standards. In fact, it would be an affront to the entire legal system to downplay the importance of pleading standards. As pointed out by the Vermont Law Review, “A higher pleading standard increases the likelihood of dismissal before a trial on the merits; a dismissal is a denial of access to the entire system of federal civil justice.”
A higher pleading standard increases the likelihood of dismissal before a trial on the merits; a dismissal is a denial of access to the entire system of federal civil justice.
In 2007, the Supreme Court granted certiorari and ultimately rendered a decision on the case of Bell Atlantic Corp. v. Twombly. The case was brought by William Twombly and Lawrence Marcus in a class-action lawsuit which alleged that Bell Atlantic and a number of other large telecommunications companies had engaged in anti-competitive behavior. Specifically, the companies had acted in order to disadvantage smaller telecom companies and raise prices to consumers primarily by agreeing not to compete with one another. The plaintiffs alleged that the companies did this by, for example, refraining from entering certain markets where another one of said telecom companies was already established, thereby distorting the true market value of their services by vastly overcharging. On the basis of the pleadings alone, the Court dismissed the case, saying that it was “conceivable” that these companies had conspired in violation of anti-trust law— but not “plausible” — that the companies had conspired with each other.
Um. Yeah, so if you’re thinking that this is a pretty arbitrary distinction, the distinction between “conceivable” and “plausible” you are NOT ALONE, my friend. Nonetheless, this was a heightened standard. Something can be conceivable without being plausible — though the opposite is, of course, not true. Regardless, this was a huge procedural upheaval for the federal rules of civil procedure.
In breaking this down, its important to have an idea of how this case’s ruling unhinged one of the most important rules in Federal Civil Procedure: Rule 8, you know, just that lil ol rule, the one that determines whether or not you even get to move forward, like if you have a claim at all. Nbd.
As you can see, the rules of pleadings are simple — and for good reason.
In his dissent, Stevens echoed a sentiment put forth by legal scholars before him for generations: that dismissing a claim at pleadings has a profound chilling effect on the ability of litigants, including those with meritorious claims, from being able to have their day in court.
“Under the relaxed pleading standards of the Federal Rules, the idea was not to keep litigants out of court but rather to keep them in.”
Stevens then felt the need to explicitly point out why, it was, exactly that the pleading standards were built the way they were, since apparently “Justice” had a very different meaning to the majority opinion writers. The point is, if the court is too willing to dismiss a claim at the pleadings stage, it will inevitably lead to injustice. The entire process is set up to dispose of unmeritorious cases at the earliest juncture at which is is reasonable to deem said case unmeritorious, but there should be at least some presumption of merit in the earliest stage.
“The merits of a claim would be sorted out during a flexible pretrial process and, as appropriate, through the crucible of trial.”
We have a civil court system for a reason, and it is ostensibly to enable grieved litigants to be heard. While its important to have certain “gatekeeping” rules, the legal system becomes impotent without enabling individuals the chance to be heard in court. It denies citizens their ability to have their grievances properly addressed.
The very purpose of Rule 8, drafted by the Advisory Committee on Civil Rules was, “to minimize the chance of a meritorious claim being thrown out because of a technical defect in the pleadings.” To further illuminate the deeply ingrained values that underlie the purpose of pleadings, the Vermont Law Review explained:
“No matter how favorable or protective the substantive laws may be, such laws are useless if a claimant cannot get into court. Recognizing the injustice of prior systems, which so frequently disposed of claims without ever addressing the merits[.]
The standard set forth in this case unfairly burdens plaintiffs and protects defendants. In heightening the pleading standard, defendants are far better able to escape liability by rendering it an onerous endeavor for plaintiffs to have their day in court.
Ok back to Twombly: The Court’s holdings in the case were two-fold. First, the court held that parallel conduct alone, absent evidence of an agreement to engage in anti-competitive behavior, is not sufficient to prove a violation of § 1 of the Sherman Act. Furthermore, the court said that a complaint must allege facts with sufficient specificity to state a claim for relief that is plausible, not merely conceivable, on its face. Initially, many lawyers, realizing the difficulty with which this would make proper litigation, had hoped the Court’s latter holding in Twombly would only be applied to Anti-Trust cases.
They were wrong.
This latter holding was solidified as being a universally applicable standard for civil proceedings in the subsequent case of Iqbal v. Ashcroft. Colloquially, the combined effect of those two cases is referred to in the legal community as “Twiqbal” — though, again, these names and that bizarre-sounding reference are relatively unknown by the general population, despite the cases far-reaching effects. To be fair, legislators did not entirely go without noticing these decisions, as two bills, one presented to Congress and the other to the Senate attempted to negate the Supreme Court’s holdings in these cases (the “Open Access to Courts Act of 2009” and the “Notice Pleading Restoration Act of 2009”, respectively) though neither bill made it to the floor for a vote.
In any case, the first holding to come from Twombly was extremely significant in coordination with the second holding, particularly with regards to antitrust claims. As aforementioned, Justice Souter, writing for the majority, held that parallel conduct alone, without evidence of an agreement to engage in anti-competitive behavior, is insufficient to prove a violation of the Sherman Act:
“While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, […] a plaintiff’s obligation to provide the “grounds” of his “entitle[ment] to relief” requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”
Problem is, this case involved much, much more than a simple recitation of the elements of the cause of action. What Souter was building up to was ultimately the heightening of the standard — it may have been CONCEIVABLE that they were in cahoots, but his opinion changed the game. Conceivable is one thing, but asking “is it PLAUSIBLE?” now required far more evidence to be plead than most plaintiffs in an anti-trust suit are capable of acquiring prior to discovery.
To reiterate, court is discussing this standard with regards to the pleadings, which is why Souter begins by mentioning the that this issue is in reference to “a complaint being attacked by Rule 12(b)(6)” — a motion to dismiss for failure to state a cause of action. That means that this motion to dismiss the claim is granted when, reading all the pleadings contained in the complaint as true, the complaint simply fails to state a series of actions which are actionable under the law. This is the lowest blow, so to speak, as far as procedural standings go: the court is basically telling the complainant, the first day you walk into court, “so, yeah… I see you made all these pleadings and stuff, and even taking each and everyone of the allegations regarding Mr. Ruffalo’s actions as true, you, uh, didn’t state anything you can sue over. Listen, you can’t sue Mark Ruffalo for not returning your fan mail.” Haha, just kidding I never tried to sue Mark Ruffalo.*
*I tried to sue JOSH GROBAN
**Please bear with me, making civil procedure entertaining is not particularly easy.
So, here’s some law from the majority opinion:
“Without more, parallel conduct does not suggest conspiracy, and a conclusory allegation of agreement at some unidentified point does not supply facts adequate to show illegality. Hence, when allegations of parallel conduct are set out in order to make a §1 claim, they must be placed in a context that raises a suggestion of a preceding agreement, not merely parallel conduct that could just as well be independent action. […] “
Even if parties are consciously engaging in parallel conduct, if they didn’t have a “meeting of the minds”, it don’t prove conspiracy kids!!!
A statement of parallel conduct, even conduct consciously undertaken, needs some setting suggesting the agreement necessary to make out a §1 claim; without that further circumstance pointing toward a meeting of the minds, an account of a defendant’s commercial efforts stays in neutral territory.
So, like, if two companies just independently concluded that, “like, hey this is going to make me and the man I’m competing with a ton more money if we just conduct business this way and stop competing. I’m sure he will stop competing with me once I stop competing with him!” On an related note, the Prisoner’s Dilemma doesn’t apply to game theory in the corporate world. Well, mostly because white collar criminals never become prisoners……… get it. because injustice. BA DUM TSSSSSS. (I hate myself)
The point is that the court is requiring this level of evidence, this PROOF of an agreement, when determining what claims are able to simply become a case. Like, I could file a claim against my dad tomorrow for the just fucking awful shirt he’s wearing right now on the basis that its causing me emotional distress. Alas, unfortunately, it would be dismissed under this rule — because it fails to state any actionable claim. (Think: Mark Ruffalo example.) (I love examples.) (Almost as much as I love sending Josh Groban fan mail and locks of my hair).
Oh, but I digress.
So, the courts are now requiring this heightened level of evidence when determining which claims can survive to the discovery phrase of the civil proceeding — the literal second phase of the civil proceeding. It is extremely relevant to bear in mind that this is not a standard being applied to how jurors make decisions on the liability of parties, this a standard being applied to how judges determine which claims are worthy of surviving the initial motion to dismiss.
But unlike the extremely awesome and very true examples which I employed, in Twombly, the plaintiffs weren’t suing over an offensively ugly Hawaiian shirt their father is wearing. These class-action plaintiffs were suing over something that, in my and many other’s opinion, presented an actionable claim — an actionable claim that was thwarted by the court’s opinion that they needed to be able to provide levels of evidence, at the pleading stage. A level of evidence that is extremely difficult to obtain because prior to discovery, even limited-discovery, conspiracy is usually HARD AS FUCK to prove.
For whatever reason, most folks do NOT decide to tape record the conversations in which they engage with their co-conspirators to illegally conspire to break the law. (“Hey, buddy, I’ve been thinking. Let’s totally violate §1 of the Sherman Act! lmao lets snap this convo”).
Unfortunately, these folks also don’t usually elect to publish lengthy documents outlining their illegal conspiratorial plans, the way I publish lengthy documents outlining my belief Josh Groban is the father of my unborn baby.
The way a plaintiff tends to prove the element of an agreement to conspire usually occurs after the plaintiff has had the chance to enter the discovery phase the proceeding, at which point she can depose witnesses, subpoena documents, e-mails, etc.
Steven’s dissent hit the nail on the head insofar as recognizing the practical implications of this decision. Pointing out in his dissent:
[…] instead of requiring knowledgeable executives […] to respond to these allegations by way of sworn depositions or other limited discovery — and indeed without so much as requiring petitioners to file an answer denying that they entered into any agreement — the majority permits immediate dismissal based on the assurances of company lawyers that nothing untoward was afoot.
Steven’s scathing rejection of the Majority’s holding acknowledges the absurdity of the assumptions which the court so readily made in favor of the corporate defendants:
The Court embraces the argument of those lawyers that “there is no reason to infer that the companies had agreed among themselves to do what was only natural anyway,” […] that “there was just no need for joint encouragement to resist the 1996 Act,” ante, at 20; and that the “natural explanation for the non-competition alleged is that the former Government-sanctioned monopolists were sitting tight, expecting their neighbors to do the same thing,”
Ultimately, Stevens had to lay it out real simple for the court:
The Court and petitioners’ legal team are no doubt correct that the parallel conduct alleged is consistent with the absence of any contract, combination, or conspiracy. But that conduct is also entirely consistent with the presence of the illegal agreement alleged in the complaint.
Thus, the holding in Twombly effectively ended a vast majority of antitrust claims at the pleadings stage of the civil proceeding. That means that before the case had a chance to even make it to the discovery phase of the civil proceeding — far, far before the case would have had a chance to be heard before a jury — the claim was simply dismissed.
So how is this relevant today? Well, although this is an unsexy federal procedural standard, it sheds light on the current legal landscape of antitrust law. Just on the facts alone, the Bayer-Monsanto merger will consolidate 58% of the cottonseed market, 75% of the corn seed market and 65% of the soybean market under one, single corporate entity. If that’s not astounding enough, consider that when Monsanto initially became the largest U.S. cottonseed company in 2007, to satisfy antitrust concerns, Monsanto agreed to sell their Stoneville Pedigree Seed unit, which accounted for 12% of U.S. cottonseed sales, to — who other than — Bayer. One could reasonably surmise that this eventual re-merger was indeed considered at the time of the first deal. For a cool $310 million, Monsanto was allowed to continue to grow. This was 2007, the same year Twombly was decided.
The very fact that both companies even feel comfortable entering into this merger (notwithstanding a $2 billion clause to Monsanto if it falls through due to antitrust issues) is illustrative of the larger legal landscape of antitrust law. In a post-Twombly world, Monsanto is not concerned with being the largest cotton seed company, as they were when they sold their Stoneville Pedigree Seed unit to Bayer in 2007. In fact, these companies merging seems to point to a belief that they ought not be concerned by having cornered the majority of every major seed market: why enter into such an agreement if they believed it doomed to fail, anyway.
Just today, a lawsuit was filed in the U.S. District Court for the Northern District of Illinois led by New York-based middleman food distributor Maplevale Farms. The suit alleges that Tyson, the $29 billion poultry industry, colluded to control supply and artificially inflate prices. If these allegations prove true, we would be looking at a situation in which for years consumers may have been paying up to 50% more for chicken than the projected market value. Oh, also, it would mean that some of the largest chicken and turkey companies in the WORLD (Tyson Foods, Pilgrim’s Pride, and Simmons Foods) had conspired, with one another, to inflate these prices, and thwart market standards. Sound familiar?
And, just for kicks, it’s worth noting the scheme allegedly began in 2007. 2007, the year Twombly was decided.
Listen, civil procedure is, like, objectively boring. But it’s SO FUCKING IMPORTANT, GUYS! The heightened standard of civil pleadings set forth in Twombly was solidified in Iqbal and arguably dismantled the foundational right of citizens to litigate civil grievances. We hear a LOT about frivolous suits, ambulance chasers, etc. etc. Lawyers suck, we get it.
But, ok, I think its worth considering that the constant discussion of frivolous suits in lieu of “Twiqbal” (or heightened pleading standards) is due in large part to the fact that the primary recipient of frivolous suits have deep pockets. Their concerns are sure to be heard.
But, hey, so do ours.
