The Plausibility of Twombly: Proving Horizontal Agreements after Twombly

Posted by D. Daniel Sokol

Alvin K. Klevorick, Yale University – Law School and Issa Kohler-Hausmann, New York University (NYU) have an interesting paper on The Plausibility of Twombly: Proving Horizontal Agreements after Twombly

ABSTRACT: We address a longstanding issue in antitrust doctrine: what must a plaintiff adduce at various procedural stages to show an agreement under Sherman Act § 1? Our major goal is to offer the most compelling interpretation and formalization of the Supreme Court’s statements on evidentiary and procedural standards for showing a § 1 violation, while recognizing that, as some have claimed, the Court has addressed the required proof of pleading without a well-articulated definition of agreement or, more narrowly, conspiracy. Our contribution attempts to formalize what we believe is the most reasonable interpretation of the Court’s reigning rules, which now include the one in Twombly. For now we do not offer a normative prescription for those rules based on foundational policy principles, such as promotion of efficiency or minimization of social costs, which include the costs of errors in the decision process. This is not to say that those policy concerns do not motivate the doctrine we are addressing, but rather that here we set ourselves the more limited task of presenting the most plausible and reasonable interpretation of the doctrine and of formalizing it in a way that aids understanding.

The primary target of our interpretive task is the Supreme Court’s 2007 decision in Twombly, which is the most recent installment in a line of cases that has addressed the requirements for establishing the existence of an agreement as a matter of substantive antitrust law and civil procedure. We begin by locating Twombly in the context of Sherman Act § 1 jurisprudence that courts have adopted to try to minimize overall expected error costs in deciding conspiracy cases. Then we describe a leading – perhaps the leading – approach that courts have followed in delineating the types of facts a plaintiff relying on circumstantial evidence must adduce to prove her § 1 conspiracy claim, the doctrine commonly know as “plus factors.” This discussion is complemented by an account of how Monsanto and Matsushita together set the standard for how much of that type of evidence such a plaintiff needs to offer to withstand a motion for summary judgment. In these discussions we introduce a conceptual distinction between the type and quantum of proof and argue that it is key to understanding and formalizing the rules announced in the line of cases addressing evidentiary sufficiency of § 1 claims. Consequently, this duality helps us distinguish the issues in Monsanto and Matsushita from the motion to dismiss question addressed in Twombly.

We bring these two elements of types of evidence and quantum of evidence together in a description of the way that the circuit courts integrated the consideration of plus factors and the holding in Matsushita into a test the plaintiff must pass at the summary judgment stage. We introduce the notation of Bayesian probability to formalize the tests that have emerged across the circuit courts for § 1 plaintiffs to withstand summary judgment.

The case of principal concern, Twombly, then takes center stage as we describe the difference between the District Court’s and the Second Circuit’s analyses of the case, and then take up the argument between the parties at the Supreme Court. Finally, we offer our reading of the Supreme Court’s Twombly decision and propose a formalization of our interpretation again using the notation of Bayesian probability. The latter helps to distinguish our proposed reading of the case’s holding from the settled doctrine around summary judgment. We briefly conclude with remarks on the future of Twombly’s “plausibility” standard and the task of proving horizontal agreements in the future.