Discovery Resources

Interview with Mary Mack, Esq., Corporate Technology Counsel at Fios, Inc.

1. What was the dispute between Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 about?

William Twombly sued Bell Atlantic for violating Section One of the Sherman Antitrust Act, found in 15 U.S.C. § 1. The class action complaint was made by Twombly on behalf of all individuals who purchased local telephone or high speed internet services within the United States, following the breakup of AT&T. The plaintiffs alleged that the country’s major providers of local telephone service had conspired not to compete with each other in their legacy markets and to prevent competitive entry into those markets.

2. Why do you call Twombly a sleeper case?

Twombly is a Supreme Court opinion on a narrow issue where the top court waxes eloquent on e-discovery costs as a reason to raise the pleading bar on certain antitrust cases. Besides impacting other types of litigation, it will undoubtedly impact the e-discovery portion of most cases.

3. What was the initial ruling in the case? Why did it go to the Supreme Court?

The district court dismissed the case and concluded that plaintiffs failed to allege sufficient facts from which a conspiracy could be inferred and granted defendants’ motion to dismiss. The opinion relied heavily on case law concerning the necessary proof for an antitrust plaintiff to survive summary judgment in a heavily concentrated market. Although the district court noted that Rule 8 of the Federal Rules of Civil Procedure requires only a “short and plain statement of the claim,” it held that plaintiffs’ complaint was insufficient because parallel behavior by competitors is not illegal absent a formal agreement to restrain trade, and that not enough notice was given to the defendants regarding the plaintiffs’ conspiracy theory for them to adequately prepare a defense.

The plaintiffs appealed to the Second Circuit, arguing that the district court incorrectly applied the standard of proof. In addition, the plaintiffs argued that the district court erred by not accepting all of plaintiffs’ allegations. The Second Circuit agreed with plaintiffs, finding that the Federal Rules did not require a heightened pleading standard for antitrust claims and that plaintiffs’ allegations met the notice pleading standard.

4. Why did the Supreme Court reverse the appeals court?

Essentially, the U.S. Supreme Court majority ruled that plaintiffs could not allege a conspiracy just because it would seem that one existed. The Supreme Court reversed the Second Circuit, largely agreeing with the district court’s reasoning and analysis, and stated that a plaintiff’s factual allegations must be “beyond a speculative level.” In future cases, plaintiffs will have to cite some factual basis for the existence of a conspiracy.

5. What’s the significance of the ruling?

In this case, the Federal Rules of Civil Procedure were altered by the Supreme Court. Essentially, in the past, liberal pleadings were permitted and, as a result, cases didn’t get thrown out very easily. The mere allegation that all Baby Bells engaged in the same behavior might have been enough for a pleading to proceed with a conspiracy case. With the Twombly ruling, the implication now is that plaintiffs better allege some factual basis before making such a claim. The Court has heightened the requirements to survive a motion to dismiss. Defendants will be demanding more from the pleadings, or they’ll move for dismissal. As the dissenting minority points out in its opinion, defendants don’t even have to answer the complaint if pleadings do not allege a particular factual pattern that would get them over the first gate. Previously, a plaintiff could get to the discovery phase with some predictability and then look for facts to support antitrust or parallelism. Now the burden will be on the plaintiff to come in with at least some facts, or face dismissal. There will be many more motions to dismiss in other areas, citing this case. 

6. How does this ruling impact cost and burden arguments related to e-discovery?

I believe it will be used even before burden arguments. It will come up in scheduling conferences.  The Court clearly addressed the cost and scope of discovery in the majority opinion. Zubulake, Qualcomm and others were decisions by lower level judges. This is the Supreme Court. If you read the case and see the majority’s reasoning, it’s all about runaway discovery costs. And it will be used by defendants well beyond the antitrust arena for motion practice.

7. What can defendants do to prepare for and argue against a “fishing” expedition during discovery?

Pay really close attention to what was plead. Then make sure there are enough facts for that suit to survive. If not, there is a better chance to handle it at the 12(b)(6)—motion to dismiss—level. While it may take some time for Twombly to permeate other types of litigation, the reasoning in it can underpin persuasive collaboration during the meet and confer or scheduling conference to rein in the scope of discovery.

8. What level of specificity is now expected by the courts to uphold a case or discovery request?

This will differ depending on the type of litigation. In antitrust conspiracy allegations, it appears that the courts are now requiring a time or place of an agreement and the specific companies involved in the agreement. It must go further than “we assume a conspiracy is out there because it looks like it.” Plaintiffs will have to be specific in talking about the behaviors that are creating a market monopoly. Market behavior is not enough to prove conspiracy. You need hard evidence and facts.

Now, more than ever, narrowing discovery with magistrate judges will require documentation and backup:

A magistrate supervising discovery does not—cannot—know the expected productivity of a given request because the nature of the requester’s claim and the contents of the files (or head) of the adverse party are unknown. Judicial officers cannot measure the costs and benefits to the requester and so cannot isolate impositional requests. Requesters have no reason to disclose their own estimates because they gain from imposing costs on rivals (and may lose from an improvement in accuracy)…Twombly, footnote 6

9. Are there other cases surfacing that might be or have had the “Twombly” rule applied?

There is one case involving Bank of America, which has decided to cooperate with the DOJ. Others to watch are the class actions recently filed against Wachovia. See:

http://www.bondbuyer.com/$nocookies$/article.html?id=20080414G0V7Y6OA

In addition, there’s a recent opinion from the third circuit citing Twombly in Phillips v. County of Allegheny – Third Circuit – February 5, 2008, that can be found here:

http://www.ca3.uscourts.gov/opinarch/062869p.pdf

10. What advice do you have for corporations who are subject to or in the midst of antitrust disputes and litigation?

Read the opinion in Twombly (see below). I would recommend that, rather than reading the commentary. This is one of the most significant opinions for corporate defendants to come down in many years. The opinion, in full, can be found at http://www.supremecourtus.gov/opinions/06pdf/05-1126.pdf.

Here’s the discovery portion:

We alluded to the practical significance of the Rule 8 entitlement requirement in Dura Pharmaceuticals, Inc. v. Broudo, 544 U. S. 336 (2005), when we explained that something beyond the mere possibility of loss causation must be alleged, lest a plaintiff with “‘a largely groundless claim’” be allowed to “‘take up the time of a number of other people, with the right to do so representing an in terrorem increment of the settlement value.’” Id., at 347 (quoting Blue Chip Stamps v. Manor Drug Stores, 421 U. S. 723, 741 (1975)). So, when the allegations in a complaint, however true, could not raise a claim of entitlement to relief, “‘this basic deficiency should . . . be exposed at the point of minimum expenditure of time and money by the parties and the court.’” 5 Wright & Miller §1216, at 233–234 (quoting Daves v. Hawaiian Dredging Co., 114 F. Supp. 643, 645 (Haw. 1953)); see also Dura, supra, at 346; Asahi Glass Co. v. Pentech Pharmaceuticals, Inc., 289 F. Supp. 2d 986, 995 (ND Ill. 2003) (Posner, J., sitting by designation) (“[S]ome threshold of plausibility must be crossed at the outset before a patent antitrust case should be permitted to go into its inevitably costly and protracted discovery phase”).

Thus, it is one thing to be cautious before dismissing an antitrust complaint in advance of discovery, cf. Poller v. Columbia Broadcasting System, Inc., 368 U. S. 464, 473 (1962), but quite another to forget that proceeding to antitrust discovery can be expensive. As we indicated over 20 years ago in Associated Gen. Contractors of Cal., Inc. v. Carpenters, 459 U. S. 519, 528, n. 17 (1983), “a district court must retain the power to insist upon some specificity in pleading before allowing a potentially massive factual controversy to proceed.” See also Car Carriers, Inc. v. Ford Motor Co., 745 F. 2d 1101, 1106 (CA7 1984) (“[T]he —————— suggestive. Each must be crossed to enter the realm of plausibility.

Opinion of the Court
Costs of modern federal antitrust litigation and the increasing caseload of the federal courts counsel against sending the parties into discovery when there is no reasonable likelihood that the plaintiffs can construct a claim from the events related in the complaint”; Note, Modeling the Effect of One-Way Fee Shifting on Discovery Abuse in Private Antitrust Litigation, 78 N. Y. U. L. Rev. 1887, 1898–1899 (2003) (discussing the unusually high cost of discovery in antitrust cases); Manual for Complex Litigation, Fourth, §30, p. 519 (2004) (describing extensive scope of discovery in antitrust cases); Memorandum from Paul V. Niemeyer, Chair, Advisory Committee on Civil Rules, to Hon. Anthony J. Scirica, Chair, Committee on Rules of Practice and Procedure (May 11, 1999), 192 F. R. D. 354, 357 (2000) (reporting that discovery accounts for as much as 90 percent of litigation costs when discovery is actively employed). That potential expense is obvious enough in the present case: plaintiffs represent a putative class of at least 90 percent of all subscribers to local telephone or high-speed Internet service in the continental United States, in an action against America’s largest telecommunications firms (with many thousands of employees generating reams and gigabytes of business records) for unspecified (if any) instances of antitrust violations that allegedly occurred over a period of seven years.

It is no answer to say that a claim just shy of a plausible entitlement to relief can, if groundless, be weeded out early in the discovery process through “careful case management,” post at 4, given the common lament that the success of judicial supervision in checking discovery abuse has been on the modest side. See, e.g., Easterbrook, Discovery as Abuse, 69 B. U. L. Rev. 635, 638 (1989) (“Judges can do little about impositional discovery when parties control the legal claims to be presented and conduct the discovery themselves”). And it is self-evident that the problem of discovery abuse cannot be solved by “careful scrutiny of evidence at the summary judgment stage,” much less “lucid instructions to juries,” post, at 4; the threat of discovery expense will push cost-conscious defendants to settle even anemic cases before reaching those proceedings. Probably, then, it is only by taking care to require allegations that reach the level suggesting conspiracy that we can hope to avoid the potentially enormous expense of discovery in cases with no “‘reasonably founded hope that the [discovery] process will reveal relevant evidence’” to support a §1 claim. Dura, 544 U. S., at 347 (quoting Blue Chip Stamps, supra, at 741; alteration in Dura).

6 ——————{ In Footnote 6 the court addresses the dissent on phased discovery:}
6The dissent takes heart in the reassurances of plaintiffs’ counsel that discovery would be “ ‘ “phased” ’ ” and “limited to the existence of the alleged conspiracy and class certification.” Post, at 24. But determining whether some illegal agreement may have taken place between unspecified persons at different ILECs (each a multibillion dollar corporation with legions of management level employees) at some point over seven years is a sprawling, costly, and hugely time-consuming undertaking not easily susceptible to the kind of line drawing and case management that the dissent envisions. Perhaps the best answer to the dissent’soptimism that antitrust discovery is open to effective judicial control is a more extensive quotation of the authority just cited, a judge with a background in antitrust law. Given the system that we have, the hope of effective judicial supervision is slim: “The timing is all wrong. The plaintiff files a sketchy complaint (the Rules of Civil Procedure discourage fulsome documents), and discovery is launched. A judicial officer does not know the details of the case the parties will present and in theory cannot know the details. Discovery is used to find the details. The judicial officer always knows less than the parties, and the parties themselves may not know very well where they are going or what they expect to find. A magistrate supervising discovery does not—cannot—know the expected productivity of a given request because the nature of the requester’s claim and the contents of the files (or head) of the adverse party are unknown. Judicial officers cannot measure the costs and benefits to the requester and so cannot isolate impositional requests. Requesters have no reason to disclose their own estimates because they gain from imposing costs on rivals (and may lose from an improvement in accuracy)…

About the Expert

Mary Mack, Esq., Corporate Technology Counsel, Fios, Inc.

Whether in response to an inquiry, a second request or class action litigation, Mary Mack brings legal and technical professionals together in a focused manner to determine a successful, cost-effective course of compliance with electronic discovery requests. As Corporate Technology Counsel for Fios, she has more than 20 years experience delivering enterprise-wide electronic discovery, managed services and software projects with legal and IT departments in publicly held companies. Mary is a hands-on strategic advisor to counsel for some of the largest products liability class actions, government investigations and intellectual property disputes. Clients include the largest law firms, pharmaceutical companies and insurance companies in the world.

A member of the Illinois Bar, ACCA and the ABA’s Section on Litigation, Mary received her J.D. from Northwestern University School of Law (1982) and a B.A. from LeMoyne College in Syracuse, NY. She holds certifications in Computer Forensics and Computer Telephony.

Mary is one of the leading speakers and authors on electronic discovery issues, technology and the law. She is co-author of the popular book, “A Process of Illumination: The Practical Guide to Electronic Discovery,” and hosts the blog, “Sound Evidence,” featured on DiscoveryResources.org. She’s is also regularly featured as an expert in the leading magazines and newspapers, such as The New York Times, Inside Counsel Magazine, Law.com, Chicago Lawyer, Compliance Week and Metropolitan Corporate Counsel Magazine.

Filed under Case Law, Case Law & Rules, Featured Articles, From the Experts, Home Page Featured, Law & Technology, Technology Counsel.

 Email This…   Print This…