Seldom does Blawgletter get the pleasure of reading an Intriguing and Forceful Analysis of a recent and important court of appeals decision. Our dear friend Sam Simon blessed us with his views about In re Ins. Brokerage Antitrust Litig., No. 07-4046 (3d Cir. Aug. 16, 2010) (post here), today. And, with his kind permission, we pass his thoughts on to you:
The court of appeals' recent decision in In re Insurance Brokerage Antitrust Litigation, No. 07-4046 (3d Cir. Aug. 16, 2010), presents a situations that is worth a further look.
The unusual antitrust case is an appeal of consolidated private civil actions based on an enforcement effort by the New York State Attorney General's office that the Multidistrict Panel consolidated before District Judge Garrett Brown in the District of New Jersey. The court of appeals' opinion weighs in at 200 pages, so you are strongly advised to have a bottle of Excedrin or Advil and a tall glass of water next to you as you peruse it.
The court's decision is unusual in many respects. In fact, it is so unusual that it may not serve as precedent for much of anything beyond its peculiar facts.
The first item that immediately strikes the reader's attention is that plaintiffs declined to make this a rule of reason case. Hoping to simplify the litigation, plaintiffs insisted on treating the convoluted legal theories and the complex factual scenario in this "hub and spoke" case — actually, two complaints, each as long as the court of appeals' opinion — as either a per se or a quick look case. Though the court of appeals declined further to break down "quick look" into either "to condemn" or "to exonerate," defendants were able to use jiu-jitsu and effectively turn plaintiffs' attempt to simplify the litigation to defendants' own advantage. This is lawyering of the highest quality.
One of the factors that makes the decision unusual, and perhaps sui generis, is that the district court permitted plaintiffs to take years of discovery, enabling them to draw upon documents and depositions in the successive drafts of their complaint even as the court confronted (and granted) repeated dismissal motions. Slip Op. at 23. The fact that both the district court and the court of appeals addressed defendants' facial challenges to the complaint under Rule 12(b)(6) and Twombly/Iqbal, as opposed to converting the motion into one for summary judgment, would seem inconsisent with the substantial amount of detailed evidentiary matter set forth in the complaint, some of which the court of appeals quoted at length.
Under these circumstances, it might be suggested that the court of appeals confused and conflated Rule 12(b)(6) and Rule 56 standards, thus rendering the opinion all but useless as a guide for evaluating other antitrust complaints under either standard. On the one hand, much admissible evidence, as gathered during the discovery process, was considered in deciding the dismissal motions, thus removing the motion from one that examined only the facial sufficiency of the Complaint. But on the other hand, there was no contention that plaintiffs had completed discovery, thus arguably making the filing of a Rule 56 motion premature.
The decision itself seems chronically confused on whether it comprises a facial examination of a repeatedly amended complaint or a summary judgment evaluation. Compare Slip Op. at 25 (a complaint must plead evidence), 51 (plaintiff must plead "evidentiary facts" at a time when discovery has not yet begun), 24 and 57 ("a single 'method of proof' at the pleading stage"), 76 n.30 ("When we search for additional information") and 104 (use of detailed evidence to evaluate complaint, e.g., "the complaint contains enough well-pled factual matter") with the many references throughout the opinion (e.g., Id. at 144) that the decision is only "based on the face of the complaint," and on nothing else.
The court of appeals wanted to have its cake and eat it too. The result of this chronic confusion is likely to strike an objective reader as 200 pages of gibberish or, as one eminent practitioner I know has stated, "the ravings of the law clerks." Such an opinion would have given someone like Justice Holmes a heart attack. Its War and Peace-like length bespeaks a fundamental incomprehesion of the issues involved, as well as the role of an appellate court. The decision, with its staggering length and its attempt to traverse much of antitrust, insurance-antitrust, and RICO jurisprudence in a tour d'horizon of limitless dicta, sometimes on topics of no possible relevance to the decision (e.g, tying arrangements, see Slip Op. at 37 n.19), is a locus classicus of the frequently repeated observation that "appellate courts" may be properly defined as the law clerks and their word processors.)
The unfortunate thing is that no one is supposed to care about a complaint and an answer, which only frame the case and set out discovery perimeters, and are (or should be) quickly forgotten. Modern federal practice ("modern means" since 1938, the same year Mr. Tompkins walked along a railroad track in Hughestown, Pa., near Pittston and Forty Fort) is supposed to be about a search for the truth, i.e., Just the Facts. This is why Rule 15(a) permits untrammeled leave to amend a complaint, including even during the trial itself. Confronted with such embarassments as this uncouth appellate opinion, it does not take a perfervid imagination to visualize the ghosts of David Dudley Field and code pleading arising, like ghouls, from the grave.
The court of appeals affirmed the district court's dismissal of the principal antitrust allegations on the ipse dixit that, no matter how explicitly they may have been pleaded, "they do not give rise to a plausible reference of horizontal conspiracy" — "plausible," that is, under the court's "understanding" of Twombly. But Twombly's reference to "plausible" can mean anything at all because plausibility, like beauty, is in the eye of the beholder. The court also makes the fundamental error of considering plaintiff's conspiracy allegations singly and wiping the slate clean after each, as opposed to considering them holistically, as it was required to do under Poller v. CBS (1962).
Several additional points. The opinion (Id. at 114) cites the court of appeals' previous decision in Lum for the proposition that Rule 9(b) may have a place in anaylzing an antitrust complaint. In 1995, Congress resolved the historic tension between Rule 9(b) and Rule 8(a) in favor of demanding microscopic particularity in pleadin in securities cases sounding in fraud. This antitrust decision another step in particularizing antitrust complaints, and thus in eviscerating another area of private enforcement of fundamental federal policy. (At one point there was a bill in Congress to reverse Twombly and restor Conley v. Gibson, but I don't know what happened to it or, if if ever becomes law, the Supreme Court will strike it down on separation of powers grounds.)
The opinion (Id. at 167) cites Dura and the "in terrorem" effect of defendants of certain types of litigation — here, a civil RICO suit, which the judiciary has long disfavored. But civil RICO is no more terroristic than Section 4 of the Clayton Act, i.e., treble damages + a reasonable statutory attorney's fee. The next, logical step will, of course, be to call Section 4 itself an "in terrorem" statute, which will lead to its repeal or modification. (This may not be altogether a bad thing because it has long been the excuse that foreign antitrust authorities employ not to assist our own private enforcement efforts, e.g., In re Uranium Cartel Antitrust; moreover, the statutory imposition of treble damages + attorney's fees conduces many a district judge to look with jaundiced eye on private antitrust enforcement.) Futhermore, citing a Seventh Circuit decision in Limestone the opinion assumes that treble damages are punitive (Id. at 167). Not mentioned is Justice Marshall's decision in Hawaii v. Standard Oil (1972), in which the Court stated that treble damages are not punitive but compensatory.
For its more learned moments the opinion relies on treatises by Herbert Hovenkamp, among the most partisan and ideological of scholars, to the exclusion of many other scholars whose views of the antitrust laws are different and, in many cases, irreconcilable.
At one point (Slip Op. at 86), the opinion actually rules in plaintiffs' favor by concluding that "bid-rigging behavior does plausibly suggest concerted action by [defendants]." But instead of extrapolating from this conclusion that the other alleged conduct is also sufficiently suseptible of a "concerted action" inference to permit full-bore discovery, the court holds exactly the contrary, to wit, that it does not. This suggests that, though the opinion was unanimous, there was actually an irreconcialible split among its members as to the correct result, so that the decision became a classic split decision, with something for everyone. Nonetheless, even the areas in which the district court's analysis was found deficient did not, for the most part, produce a clear win for plaintiffs; rather, those particular portions of the decision below were largely vacated and remanded for yet further study and analysis in the district court.
The decision has a near-endless discussion of McCarran-Ferguson, one of the few statutes to be named after an airport. See Slip Op. at 122-45. It should be of interest to all of us who litigate in the antitrust-insurance field.
Finally, and captiously, the decision is not free of grammatical and syntactical errors. Examples include (a) the phrase "plaintiffs' allege that. . ." (Slip Op. at 76), with its misplaced apostrophe, (b) an inability to distingush whether the phrase "none" ["none" ="no one"], when used as the subject of a sentence, takes a plural or a singluar predicate (compare Slip Op. at 79 ("none. . .give reason" and 101 ("none have merit") vs. Slip Op. at 126 ("none. . .is") and 1988 ("none was addressed"), thus betraying multiple authorship, and (c) the use of a word (instantiations", Slip Op. at 80) that does not appear in a standard dictionary. These, to be sure, are scarcely the decision's primary flaws.
Plaintiffs should nonetheless have reason to be pleased. They have settled with Marsh & McLennan defendants during the course of the appeal. (Slip Op. at 24 n.4). This development would hopefully mean that Marsh has agreed to a cooperation clause. Because Marsh is "the dominant force" and "did the enforcing" of the alleged conspiracy (Slip Op. at 103, see also Id. at 106), the Marsh defendants' hoped-for cooperation with plaintiffs could force the remaining defendants to the settlement table. Given the unremitting hostility plaintiffs encountered in the district court and the prolix, turgid, and largely negative decision their efforts have generated in the court of appeals, this is their moment to resolve the case.
Samuel R. Simon
Bala Cynwyd, PA
By the way, you can reach Sam at firstname.lastname@example.org. Sam practices antitrust and securities law and has been an adjunct professor at Rugers Law School since 2004. He has also testified before Congress on antitrust issues on behalf of the American Antitrust Institute.