Supreme Court declines to halt 2nd Circuit’s Twiqbal pushback

January 9, 2013

In litigation, as in life, there’s usually no better strategy for catching the attention of rulemakers than to tattle on subordinates for ignoring their directives. That was clearly the thinking of lawyers for a group of magazine publishers who wanted the U.S. Supreme Court to review a 2012 ruling by the 2nd Circuit Court of Appeals that revived an antitrust conspiracy case against them. The publishers’ petition for certiorari claimed that the 2nd Circuit opinion undermined the high court’s holdings in Bell Atlantic v. Twombly and Ashcroft v. Iqbal — the incredibly consequential recent Supreme Court decisions that made it easier for defendants to win the dismissal of plaintiffs’ complaints. The publishers called on the justices to use the opportunity of the 2nd Circuit decision, captioned Anderson News v. American Media, to reiterate their intentions in Twombly and Iqbal (known slangily as Twiqbal).

On Monday, the Supreme Court refused to take the bait and denied the cert petition. That leaves the publishers’ brief to serve the perverse purpose of explaining to antitrust plaintiffs (and, for that matter, plaintiffs in all sort of other cases) exactly how the 2nd Circuit’s Anderson decision permits them to get past dismissal motions premised on Twombly and Iqbal. (The brief even includes a handy rundown on trial judges outside of the 2nd Circuit who have cited the Anderson case when they refused to toss antitrust complaints.) The justices may, of course, decide later on to revisit circuit court interpretations of Twiqbal, but for now the cert denial is undoubtedly good news for plaintiffs.

In the underlying case, the magazine wholesaler Anderson News c laimed that it was driven out of business when publishers conspired to resist its attempt to impose new per-magazine and inventory surcharges on them. U.S. District Judge Paul Crotty tossed the complaint, finding that Anderson hadn’t met the Twombly standard of creating a plausible inference of collusion, since there were alternative and legitimate business reasons for each publisher independently to decide not to pay the new charges. But in April 2012, the 2nd Circuit vacated Crotty’s decision.

Specifically, the 2nd Circuit held that antitrust plaintiffs do not have to show at the pleading stage that their allegations are “more likely than not” to be true nor that there is no other plausible, legal explanation for defendants’ actions. As long as the complaint offers specific, factual allegations of collusion, the appeals court said, it should not be dismissed by the trial judge. “The choice between two plausible inferences that may be drawn from factual allegations is not a choice to be made by the court on a (defense dismissal) motion,” wrote Judge Amalya Kearse for the panel. “A court ruling on such a motion may not properly dismiss a complaint that states a plausible version of the events merely because the court finds a different version more plausible.”

According to the publishers’ cert petition, the 2nd Circuit’s formulation “cannot be reconciled with the precedent” of the Supreme Court. “The central teaching of Twombly is that when allegations of circumstantial facts raise two competing inferences — one unlawful and one benign — the court must weigh the competing inferences to judge whether the inference of unlawful conduct is more likely,” the brief said. “The 2nd Circuit’s holding — that, when considering a motion to dismiss, a district court cannot compare the likelihood of an inference of unlawful behavior with that of lawful activity — contradicts this court’s standard under Twombly and Iqbal.” (The publishers also claimed that the 2nd Circuit standard was at odds with the 3rd Circuit’s holding in Burtch v. Milberg Factors, which upheld the dismissal of a price-fixing and antitrust conspiracy case.)

As you might expect, Anderson’s lawyers at Kellogg, Huber, Hansen, Todd, Evans & Figel and Kasowitz, Benson, Torres & Friedman argued in their brief opposing cert that the 2nd Circuit decision was in line with Supreme Court precedent and rulings by other federal circuits. Since the Supreme Court doesn’t explain cert denials, we don’t know whether the justices agreed. But we do know that Anderson has already been a boon to antitrust plaintiffs in the e-books litigation in Manhattan federal court, as well as in the other cases cited by the publishers in their cert petition. As long as the ruling remains intact, you can expect to see it propping up plaintiffs’ cases.

The publishers were represented by, among other firms, Dechert; Gibson, Dunn & Crutcher; Troutman Sanders; and Jones Day. I left message with lawyers at Dechert and Gibson, as well as with Anderson counsel at Kellogg Huber, but didn’t hear back.

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