Posted by Social Science Research Network
By William H. Page (University of Florida)
Abstract: Twombly and Matsushita have created a staged decision-theoretic inquiry in which courts ask at the pleading stage and, if necessary, again after discovery whether the plaintiff has made a sufficiently “plausible” showing to justify the expected direct and indirect costs of further inquiry. Rather than pass contentions of fact through the stages of litigation with minimal review, the framework increases the burdens on pretrial motions, professedly to avoid unjustified direct costs of discovery and indirect costs of “false inferences.” In cases like Twombly and Matsushita themselves, that allege price fixing or other per se violations of Section 1 of the Sherman Act, the issue on these motions turns on whether the plaintiff has made a plausible showing of “agreement” rather than “mere” interdependent oligopolistic pricing. As I have shown elsewhere, courts distinguish agreement from interdependent pricing by the sorts of communications the rivals used to coordinate their actions: plaintiffs must allege facts and later offer evidence that raises a plausible inference that the rivals communicated privately about their future competitive choices. Courts differ, however, on whether plausibility means different things at the two stages. Some reason that, because the plaintiff has to find evidence of private communication among rivals, the showing necessary to reach discovery should be less onerous than the showing necessary to reach a jury. I examine the consequences of these different standards, and consider whether predismissal discovery might mitigate the problems of estimation in evaluating plausibility.