Bell Atlantic decision perplexes judges, attorneys

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Are you perplexed by the U.S. Supreme Court's decision in Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955 (2007)?

You're not alone, based on the comments of the April 17 panel at the Eastern District of Wisconsin Bar Association's annual meeting.

U.S. District Court Judge Rudolph T. Randa expressed a view shared by many others when he simply asked, "What the hell?"

Since Conley v. Gibson, 355 U.S. 4 (1957), was decided 50 years earlier, the rule had been that a complaint should not be dismissed for failure to state a claim under FRCP 8(a)(2) "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."

The only exception was under Rule 9(b), requiring particularity for allegations of fraud or mistake.

In Bell Atlantic, however, the Supreme Court changed the standard, holding that, to state a claim under the Sherman Act, plaintiffs asserting collusion must also allege facts tending to exclude economically rational explanations for the conduct.

The plaintiffs merely alleged parallel conduct on the part of local telecommunications carriers in staying out of each other's markets, which the Supreme Court found insufficient.

However, the Supreme Court denied that it was adopting or applying any heightened pleading standards.

Shortly afterwards, the Supreme Court reversed a lower court's holding which dismissed a prisoner's complaint alleging deliberate indifference to his medical needs. Erickson v. Pardus, 127 S.Ct. 2197 (2007).

The justices held that the complaint need only give the defendant fair notice of what the claim is, and that specific facts are not necessary.

Despite the Supreme Court's distinguishing Bell Atlantic in Erickson, Judge Randa stated that he expected Bell Atlantic to be applied to a wide variety of cases in which discovery is "expensive."

One problem he noted with that standard is that "expensive" is a relative term — what is expensive depends as much on the parties' wealth as the nature of the action.

Richard M. Esenberg, a law professor at Marquette University, observed that the students in his civil procedure course shared Randa's response to the decision in Bell Atlantic. "It's hard to know what to tell them," he said. "'What the hell?' Everything else is just elaboration."

However, Esenberg suggested that the meaning of Bell Atlantic may be that, where an element of the complaint is necessarily opaque, and difficult to either prove or disprove, the court wants to know that the plaintiff has something to support its claim, before it will allow discovery to go forward.

Esenberg explained that the defendant's guilt "doesn't have to be the most plausible inference from the facts alleged, but there must be some basis to infer it is true, rather than not."

Karyn L. Rotker, an attorney with the ACLU in Milwaukee, agreed with Randa's response to the case. However, she believed that the decision could and should be limited to cases where the conduct alleged could be either legal, or illegal, and the cost of discovery is high.

Of the panelists only attorney Scott W. Hansen, of Reinhart Boerner Van Deuren s.c., considered Bell Atlantic a positive development in the law, one that discourages "false positives" — where parallel conduct by competitors is not the result of agreement not to compete.

Hansen compared the Bell Atlantic case to law firms in different cities concentrating on their own cities, rather than moving into other ones.

Foley & Lardner, he noted, has no office in Minneapolis, while Dorsey & Whitney, the largest firm in Minnesota, has no office in Milwaukee.

Had Bell Atlantic been decided otherwise, Hansen contended that anyone could sue the firms for conspiracy not to compete, and proceed to discovery, even without alleging any fact that would rule out lawful behavior on their part — something Hansen said would encourage "legal extortion."

However, Randa took issue with the Supreme Court's denials that it was setting a heightened standard for pleading. "They have created a heightened standard, but they won't call it that," he said.

Randa also took issue with how the Seventh Circuit has interpreted Bell Atlantic.

Before Bell Atlantic, the law in the Seventh Circuit required very little from a plaintiff in the complaint.

A frequently quoted statement on the issue stated, "Any district judge (for that matter, any defendant) tempted to write, 'This complaint is deficient because it does not contain …' should stop and think: What rule of law REQUIRES a complaint to contain that allegation?" Doe v. Smith, 429 F.3d 706, 708 (7th Cir.2005) (emphasis in original).

In a case decided just days before the meeting, though, the Seventh Circuit extended the holding in Bell Atlantic, to dismiss a RICO complaint. Limestone Development Corp. v. Village of Lemont, 2008 WL 852586 (7th Cir., April 1, 2008).

The court wrote, "In a complex antitrust or RICO case a fuller set of factual allegations than found in the sample complaints in the civil rules' Appendix of Forms may be necessary to show that the plaintiff's claim is not 'largely groundless.' If discovery is likely to be more than usually costly, the complaint must include as much factual detail and argument as may be required to show that the plaintiff has a plausible claim."

"I don't know what that means," Randa frankly acknowledged. "Earlier in the Limestone opinion, Judge Richard Posner stated that you can't read too much into Bell Atlantic, but then he goes on to read a ton into it."

Rotker agreed. Addressing the court's statement that "argument" should be included in the body of a complaint, she said, "I'm not sure I understand what the court means by 'argument.'"