For fifty years, judges and legal scholars often have quoted and

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1 Reproduced by permission Colorado Bar Association, 37 The Colorado Lawyer 29 (April 2008). All rights reserved. THE CIVIL LITIGATOR Pleading Standards After Twombly: Surviving a Motion to Dismiss by Timothy Beyer, Amy Benson, and Mark Mathews The U.S. Supreme Court s decision in Bell Atlantic Corp. v. Twombly retired the widely recognized federal pleading standard that a complaint will not be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim. Under the new standard, at least in federal court, a complaint must contain sufficient factual allegations to raise a right to relief beyond a speculative level. For fifty years, judges and legal scholars often have quoted and relied on the pronouncement in Conley v. Gibson 1 that a complaint should not be dismissed for failure to state a claim 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. 2 As a result of the U.S. Supreme Court s recent decision in Bell Atlantic Corp. v. Twombly, 3 this no set of facts pleading standard is no longer good law. In considering the proper standard for evaluating a motion to dismiss in an action alleging an antitrust claim under 1 of the Sherman Act, Justice Souter announced for the seven-totwo majority that Conley s famous observation has earned its retirement and defined its legacy as an incomplete, negative gloss on an accepted pleading standard that is best forgotten. 4 Twombly marks a clear departure from prior liberal federal pleading standards and may represent one of the most significant pronouncements on pleading by the Supreme Court in the past fifty years. However, it is not entirely clear what pleading standard replaces the standard delineated in Conley. The Twombly Case The Twombly action was brought on behalf of a putative class of local phone and high-speed Internet consumers against the four then-existing Baby Bell telephone companies. The complaint alleged that the Baby Bells had violated 1 of the Sherman Act 5 by agreeing not to compete in one another s geographic territories and to exclude other upstart competitors from competing. 6 The complaint contained no factual allegations of an actual agreement beyond a conclusory statement that upon information and belief defendants have entered into a contract, combination or conspiracy.... It relied on allegations of parallel conduct, including an allegation that each of the Baby Bells had not entered the others markets even in geographically contiguous areas. A plaintiff seeking to prove a collusive agreement in violation of the Sherman Act cannot rely solely on parallel business conduct by the defendants. 7 Competitors sometimes act in parallel because they agreed to do so, but companies often act in parallel as the result of independent reaction to market forces. A plaintiff relying on parallel conduct therefore must offer evidence often referred to as plus factors that tends to rule out the possibility that the defendants were acting independently to defeat a motion for summary judgment. 8 At issue in Twombly was whether, to survive a motion to dismiss, the plaintiffs had to plead plus factors to rule out the possibility that the defendants had acted independently.the district court dismissed the complaint for failing to state a claim on which relief could be granted, because the plaintiffs had not alleged any plus factors to suggest collusion. 9 The Second Circuit reversed, holding that plus factors need not be pled for an antitrust claim premised on parallel conduct to survive a motion to dismiss. Citing Conley, the Second Circuit held that a court would have to conclude that there is no set of facts that would permit a plaintiff to demonstrate that the particular Article Editors Donald Kelso, Denver, of Holme Roberts & Owen LLP (303) , donald.kelso@hro. com; Eric Bentley, Colorado Springs, of Holme Roberts & Owen LLP (719) , eric.bentley@hro.com About the Authors Timothy Beyer, Amy Benson, and Mark Mathews are shareholders at Brownstein Hyatt Farber Schreck, P.C. and members of the firm s corporate litigation practice group. Beyer is the chairman of the litigation group, and Mathews chairs the firm s natural resources practice group. The authors represented Qwest Communications International, Inc., one of the four defendants in Bell Atlantic Corp. v. Twombly. The Civil Litigator articles address issues of importance and interest to litigators and trial lawyers practicing in Colorado courts. The Civil Litigator is published six times a year. The Colorado Lawyer April 2008 Vol. 37, No. 4 29

2 parallelism asserted was the product of collusion rather than coincidence. 10 The U.S. Supreme Court Decision The Supreme Court reversed the Second Circuit and granted the motion to dismiss, holding that factual allegations of parallel conduct alone did not state a claim for relief under 1 of the Sherman Act. 11 In response to the plaintiffs argument that under Fed. R. Civ. P. 8(a)(2) only a short and plain statement of the claim was required, Justice Souter noted that the Rule requires a showing, rather than a blanket assertion of entitlement to relief that relied merely on labels and conclusion. 12 To meet this standard, a 1 claim must be pled with enough factual matter (taken as true) to suggest that an agreement was made, or at least to raise a reasonable expectation that discovery will reveal evidence of illegal agreement. 13 The Court concluded that factual allegations of parallel conduct, coupled with only conclusory assertions of an illegal agreement, did not adequately state a claim for relief under 1 of the Sherman Act. 14 As Justice Souter summarized, [W]e do not require heightened fact pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face. 15 Perhaps the most far-reaching aspect of the Twombly decision concerns the Court s response to the plaintiffs argument that their complaint should be upheld under Conley. The Supreme Court retired the Conley pronouncement that a complaint should not be dismissed for failure to state a claim, unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim that would entitle him or her to relief. Noting that the Conley standard had received frequent criticism by lower courts, the Court stated that it was appropriately limited to the unremarkable proposition that once a claim has been stated adequately, it may be supported by showing any set of facts consistent with its allegations. 16 Twombly s Scope Twombly reaffirmed that the formulaic recitation of elements of a cause of action will not do. 17 Instead, the short and plain statement of fact required by Fed. R. Civ. P. 8(a)(2) must possess enough heft to show that the pleader is entitled to relief, meaning that factual allegations must be enough to raise a right to relief above the speculative level. 18 Less clear is the level of factual detail that will be required. Under Twombly, it is not enough to allege a conceivable agreement to state a 1 Sherman Act claim.the allegations must rise to the level of plausible. 19 The Court, however, did not provide detail as to what level of facts nudge [a] claim across the line from the [merely] conceivable to what is permissibly plausible. 20 The Supreme Court likewise did not specify whether the plausibility standard applied outside the antitrust context. In his dissent, Justice Stevens suggested that whether the new pleading standard will apply in all civil cases was a question that the future will answer. 21 That said, although the Twombly Court discussed the pleading standard in the context of antitrust litigation, the Court declared that the plausibility standard flowed directly from Fed. R. Civ. P. 8(a)(2), which applies to all complaints in civil actions. Federal Application of Twombly Twombly already has been cited by several federal courts, and a number of federal circuits have applied the Twombly standard outside the antitrust context. For example, the U.S. Court of Appeals for the Tenth Circuit has applied the new plausibility standard under which a complaint must include enough facts to state a claim to relief that is plausible on its face to cases outside the antitrust arena. 22 The Second Circuit observed that [s]ome of the language relating generally to Rule 8 pleading standards seems to be so integral to the rationale of the Court s parallel conduct holding as to constitute a necessary part of that holding, and therefore has decline[d] to read Twombly s flexible plausibility standard as limited to antitrust cases. 23 The Third, Sixth, Seventh, and Eleventh Circuits also have applied the Twombly standard in nonantitrust cases. 24 State Application of Twombly Twombly s impact in state cases is less certain. 25 Colorado Rule of Civil Procedure 8(a)(2) is identical to its federal counterpart in requiring a short and plain statement of the claim showing that the pleader is entitled to relief. Accordingly, fifteen years ago, the Colorado Supreme Court adopted Conley s no set of facts standard, and since then has cited the standard on numerous occasions. 26 Colorado appellate courts repeatedly have acknowledged that when the Colorado and Federal Rules of Civil Procedure are essentially identical, case law interpreting the federal rule is persuasive in analysis of the Colorado rule. 27 Because no Colorado state court decision has discussed or cited Twombly, it remains to be seen whether the 30 The Colorado Lawyer April 2008 Vol. 37, No. 4

3 Colorado Supreme Court will continue to adhere to the Conley no set of facts standard or will replace that standard with Twombly s plausibility standard. 28 Post-Twombly Pleading Under Twombly, a plaintiff proceeding under the federal rules can no longer argue that the complaint survives unless no set of facts could support the claim. With the retirement of the Conley standard, plaintiffs can no longer rely on conclusions in a complaint because some hypothetical set of facts might arguably justify them. Twombly s replacement for the Conley test, however, has not been fully delineated. The Second Circuit concluded that the Supreme Court intended to alter the regime of pure notice pleading that had prevailed since Conley was decided fifty years ago, but found that the nature and extent of that alteration was not clear. 29 The Tenth Circuit noted a similar lack of clarity. 30 Plausibility Standard The Supreme Court s per curiam opinion in Erickson v. Pardus, 31 issued just weeks after Twombly, adds to the uncertainty about the meaning and scope of the plausibility standard. In Erickson, the Court reversed a Tenth Circuit decision that upheld the dismissal of a prisoner s 1983 complaint for failing to state a claim on which relief could be granted. 32 The prisoner alleged he faced lifethreatening consequences as a result of the state s refusal to continue his treatment for Hepatitis C. Although the Tenth Circuit applied Conley s no set of facts standard, 33 it concluded that the prisoner s allegations failed to state a claim for relief because his complaint contained only conclusory allegations and failed to allege that the discontinuance of the treatment as opposed to the Hepatitis C itself would cause substantial harm to him. 34 The Supreme Court reversed. Referring to the Tenth Circuit s opinion as a stark departure from the liberal pleading standards set forth by Rule 8(2), 35 the Court rejected the Tenth Circuit s determination that the plaintiff s pleading of a cognizable independent harm was conclusory. 36 The Court stressed the liberal pleading requirements under Fed. R. Civ.P. 8(a)(2). 37 Additionally, the Court declared that [s]pecific facts are not necessary; the statement need only give the defendant fair notice of what the... claim is and the grounds upon which it rests. 38 Although the Erickson Court cited Twombly twice once for the fair notice requirement and once for the requirement that the court accept as true all of the factual allegations contained in the complaint 39 the Court did not reference or apply Twombly s plausibility standard. Erickson may be read as a cautionary flag for applying pleading standards that are too stringent. 40 This call for caution is buttressed by the Supreme Court s express blessing in Twombly of the model form for pleading negligence, which alleges simply that a defendant struck a plaintiff with his car while the plaintiff was crossing a particular highway at a specified date and time. The Supreme Court in Twombly found these allegations provide the notice required to avoid a motion to dismiss. 41 In light of Twombly, the Second Circuit now requires a flexible plausibility standard, which obliges a pleader to amplify a claim 32 The Colorado Lawyer April 2008 Vol. 37, No. 4

4 with some factual allegations in those contexts where such amplification is needed to render the claim plausible. 42 The Tenth Circuit arguably requires more; there, a complaint now must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support of [its] claims. 43 At a minimum, Twombly requires greater scrutiny at the pleading stage. It strengthens the gate-keeping role of a court, and requires that something more than a mere possibility of entitlement to relief be pled. If, as it appears will happen, the plausibility standard applies to all civil cases, a complaint that fails to plead enough facts to state a claim for relief that is plausible on its face will fail. Conclusion In Twombly, the U.S. Supreme Court retired the commonly applied federal pleading standard that a complaint can be dismissed only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his or her claim. In its place, the Court left a plausibility standard that requires at least for an antitrust complaint under 1 of the Sherman Act allegations plausibly suggesting, and not merely consistent with, an agreement to restrain trade.this standard already has been applied outside the antitrust arena. What remains unclear, however, is how far the bar has been raised. Perhaps, as the decision in Erickson may suggest, the bar has moved little for smaller and less complex disputes. In larger, more complex cases where the burden on the courts and litigants is high, courts now may take a more active gate-keeping role at the motion to dismiss stage. Therefore, practitioners with complex cases should consider including in their complaints more detailed factual allegations to support their claims. Notes 1. Conley v. Gibson, 355 U.S. 41 (1957). 2. Id. at Bell Atl. Corp. v.twombly, 550 U.S., 127 S.Ct (2007). 4. Id. at, 127 S.Ct. at U.S.C The breakup of AT&T in 1984 created regional Bell operating companies known as Baby Bells with regulated monopolies for local telephone service in their designated geographic areas. Twombly, supra note 3 at, 127 S.Ct. at The 1996 Telecommunications Act sought to increase competition in the telephone market in part by ending the regional monopolies held by the Baby Bells. Central to the [new] scheme [was each (Baby Bell s)] obligation... to share its network with its competitors.... Id., quoting Verizon Commc ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 402 (2004). The complaint in Twombly alleged that the Baby Bells agreed not to compete in each other s territories and conspired to prevent other competitive upstarts from competing, in violation of 1 of the Sherman Act. Twombly, supra note 3 at, 127 S.Ct. at Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986). 8. Id. 9. Twombly v. Bell Atl. Corp., 313 F.Supp.2d 174, (S.D.N.Y. 2003). 10. Twombly v. Bell Atl. Corp., 425 F.3d 99, 114 (2d Cir. 2006). 11. Twombly, supra note 3 at, 127 S.Ct. at The Colorado Lawyer April 2008 Vol. 37, No. 4 33

5 12. Id. at, 127 S.Ct. at 1965 n Id. at, 127 S.Ct. at Id. 15. Id. at, 127 S.Ct. at Id. at, 127 S.Ct. at Id. at, 127 S.Ct. at Id. at, 127 S.Ct. at Id. at, 127 S.Ct. at Id. at, 127 S Ct. at Id. at, 127 S.Ct. at 1988 (Stevens, J., dissenting). 22. See, e.g.,ton Servs., Inc. v. Qwest Corp., 493 F.3d 1225, 1236 (10th Cir. July 23, 2007) (applying plausibility standard to complaint stating statutory claims under the Communications Act, 47 U.S.C. 276(a)); Alvarado v. KOB-TV, LLC, 493 F.3d 1210, 1215 (10th Cir. July 13, 2007) (applying plausibility standard to 1983 claim for violation of constitutional rights). 23. Iqbal v. Hasty, 2007 WL at *12 (2d Cir. 2007). See also ATSI Comm. v. Shaar Fund, Ltd., 2007 WL at *14 (2d Cir. 2007). 24. See Victaulic Co. v.tieman, 499 F.3d 227, 234 (3d Cir. 2007) (applying Twombly standard in covenant not to compete); Lindsay v. Yates, 498 F.3d 434 (6th Cir. Aug. 15, 2007) (discrimination claim); St. John s United Church of Christ v. City of Chicago, 502 F.3d 616, 625 (7th Cir. Sept. 13, 2007) (First Amendment and Religious Freedom Restoration Act claims); Jennings v. Auto Meter Products, Inc., 495 F.3d 466, 473 (7th Cir. July 25, 2007) (RICO claim); Financial Sec. Assur., Inc. v. Stephens, Inc., 500 F.3d 1276 (11th Cir. Sept. 18, 2007) (Section 10(b) securities claim). 25. Relatively few state courts have discussed Twombly. Among those that have, courts in Arizona, Delaware, Nebraska, and the District of Columbia have interpreted Twombly as limiting their review in a motion to dismiss to those facts actually alleged in a complaint, rather than to unpled facts that could support a cause of action. See Desimone v. Barrows, 924 A.2d 908, 929 (Del.Ch. 2007); Cullen v. Coronado, 168 P.3d 917 (Ariz.Ct.App. 2007); Holmstedt v. York County Jail Supervisor, 739 N.W.2d 449 (Neb.Ct.App. 2007); Chamberlain v. Am. Honda Fin. Corp., 931 A.2d 1018 (D.C. 2007). Conversely, in Highmark W. Va., Inc. v. Jamie, 2007 W.Va. LEXIS 111 (Nov. 20, 2007), the West Virginia Supreme Court declined to consider whether Twombly fully replaced the prevailing Conley standard and instead reaffirmed the state s use of a no set of facts standard. A Massachusetts Superior Court held in Karlis v. Tradex Swiss AG, 2007 Mass.Super. LEXIS 331 (Sept. 7, 2007), that Twombly had no effect on Rule 12(b)(6) law or practice in Massachusetts. Id. at * In Dunlap v. Colorado Springs Cablevision, Inc., 892 P.2d 1286, 1291 (Colo. 1992), the Colorado Supreme Court cited Conley s no set of facts language in describing the standard by which a motion to dismiss for failing to state a claim should be evaluated.the language of Dunlap often has been repeated and applied by Colorado courts. E.g., Dorman v. Petrol Aspent, Inc., 914 P.2d 909, 911 (Colo. 1996) ( [a] complaint is not to be dismissed unless it appears beyond doubt that the plaintiff cannot prove facts in support of the claim that would entitle the plaintiff to relief ); Rosenthal v. Dean Witter Reynolds, Inc., 908 P.2d 1095, 1099 (Colo. 1995) ( [w]e view with disfavor a C.R.C.P. 12(b)(5) motion to dismiss for failure to state a claim and uphold a trial court s grant of such a motion only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief ); Berenergy Corp. v. Zab, Inc., 94 P.3d 1232, 1237 (Colo.App. 2004) ( [a] trial court may not dismiss a complaint for failure to state a claim unless it appears that the plaintiff can prove no set of facts in support of the claim ). 27. See, e.g., Forbes v. Goldenhersh, 899 P.2d 246, 249 (Colo.App. 1994). 28. In Hemmann Mgmt. Servs. v. Mediacell, Inc., 2007 WL (Colo.App. Dec. 27, 2007), the Colorado Court of Appeals did not mention Twombly in reversing a trial court s dismissal of a complaint. Relying on state court precedent, the court held that the complaint should not be dismissed, because it adequately sets forth the transaction that is the subject of plaintiff s contract claims and provides defendant with sufficient notice of the claims asserted against it. Id. at * In Iqbal v. Hasty, 490 F.3d 143, 155 (2d Cir. June 14, 2007), the Second Circuit noted that the Twombly Court s explanation contains several, not entirely consistent, signals. 30. Alvarado, supra note 22 at 1215 n.2 ( [T]he Supreme Court was not clear [in Twombly] on the articulation of the proper standard for a Rule 12(b)(6) dismissal.... ). 31. Erickson v. Pardus, U.S., 127 S.Ct (2007). 32. See Erickson v. Pardus, 198 Fed.Appx. 694 (10th Cir. 2006). 33. See id. at 696, quoting Hall v. Bellmon, 935 F.2d 1106, 1109 (10th Cir. 1991) (quotation omitted). 34. See id. at Erickson, supra note 31 at Id. 37. Id., quoting Fed. R. Civ. P. 8(a)(2). 38. Id. at 2200, quoting Twombly, supra note 3 at, 127 S.Ct. at 1964, quoting Conley, supra note 1 at See id. at In TON Servs. and Alvarado, the Tenth Circuit noted that the decision would have been the same under either the older no set of facts standard or the new plausibility standard. TON Servs., supra note 22 at 1236; Alvarado, supra note 22 at 1215 (emphasizing the decision would be the same under a no set of facts standard, a plausibility standard, or a standard requiring facts sufficient to raise a right to relief above a speculative level ). Substantive discussion of Erickson in light of Twombly has been limited in the Tenth Circuit, where the District Court for the District of Colorado has followed Alvarado in holding that courts should look to the specific allegations in the complaint to determine whether they plausibly support a legal claim for relief. Curtis v. Brown, 2007 WL at *2 (D.Colo. Sept. 4, 2007). See also Farrell v. Okla. Dep t of Corrections, 2007 WL at *1 n.1 (W.D.Okla. Oct. 4, 2007) (holding in light of Twombly and Erickson, the standard applied to dismissals is that courts now must look to the specific allegations in the complaint to determine whether they plausibly support a legal claim for relief ). 41. Twombly, supra note 3 at, 127 S.Ct. at 1970 n Iqbal, supra note 29 at The Ridge at Red Hawk, LLC v. Schneider, 2007 WL at *3 (10th Cir. 2007). 34 The Colorado Lawyer April 2008 Vol. 37, No. 4