Bell Atlantic Corp. v. Twombly (05-1126), Winkelman v. Parma City School Dist. (05-083), Hinck v. U.S. (06-376), Office of Sen. Mark Dayton v. Hanson (06-618), L. A. County v. Rettele (06-605), Roper v. Weaver (06-313)

May 23, 2007 Supreme Court Update

Greetings, Court fans!
The Court issued a significant antitrust decision Monday and also cleared out a bit of the underbrush, issuing four other (relatively short) decisions and dismissing cert as improvidently granted in one case. We're covering everything in this Update, so be prepared for a long e-mail.
Bell Atlantic Corp. v. Twombly (05-1126) will have significant ramifications not only for antitrust cases, but maybe for federal pleadings requirements generally, so we'll begin there. The 7-2 opinion holds that a complaint under section 1 of the Sherman Act, which prohibits agreements to restrain trade or commerce, must contain some factual content plausibly suggesting an actual agreement among the defendants as opposed to merely "parallel" conduct unfavorable to competition. The majority opinion and the dissent are lengthy, with lots of interplay in the footnotes, so if you're an antitrust or federal rules junkie you would be well advised to read the decision in its entirety. We'll try to do it justice here.
The case concerned phone companies' obligations to open their networks to competitors. The breakup of AT&T's local phone business in the 1980s created the "Baby Bell" regional monopolies, but Congress took these monopolies away in the Telecommunications Act of 1996, requiring the Baby Bells (awkwardly referred to as "incumbent local exchange carriers" or ILECs) to share their networks with new carriers ("competitive local exchange carriers" or CLECs). Twombly led a potentially enormous class action against a host of ILECs, alleging that they inhibited the growth of CLECs (and thus kept phone charges high) by engaging in "parallel conduct" in their respective service areas to sabotage CLECs and by refraining from competing with each other (i.e., staying out of other ILECs' service areas). Based on the absence of "meaningful" competition between ILECs and their parallel conduct against CLECs, Twombly alleged "on information and belief" that the ILECs had agreed to restrain trade. The district court dismissed the complaint as failing to state a claim because Twombly's allegations did not exclude independent self-interested conduct, but the Second Circuit reversed, holding that a plaintiff need only plead facts that make conspiracy one of the "plausible possibilities."
Construing the Second Circuit's ruling to require only that a complaint make conspiracy "conceivable," the Court reversed, in an opinion by Justice Souter. The general federal pleading standard requires only "fair notice" of the claim and its grounds, with enough factual allegations to make a right to relief more than speculative. Noting that Twombly had relied on an old chestnut coined by Justice Black in Conley v. Gibson (and beloved by plaintiffs), to the effect that a complaint is well-pleaded unless the plaintiff can prove "no set of facts" that entitle him to relief, the Court noted that this phrase had "earned its retirement" as "an incomplete, negative gloss" on federal notice pleading requirements (i.e., don't cite it anymore). In the context of a Sherman Act claim, the Court held, the general rule requires enough factual content to "plausibly suggest" conspiracy – that is, "enough fact to raise a reasonable expectation that discovery will reveal evidence of illegal agreement." Because otherwise lawful parallel conduct does not bespeak unlawful agreement, an allegation of parallel conduct and a mere "assertion" of conspiracy is not enough: The conduct must not merely be consistent with agreement, but suggestive of it (to cite one possible example noted by the Court, the ILECs' making simultaneous and historically unprecedented pricing decisions would be suggestive of collusion). The Court seemed particularly concerned with the expense of antitrust discovery; here, the cost of discovery could have been enormous (Twombly's class might have encompassed 90 percent of American local phone subscribers), so the Court took pains to note the need for district courts to require some specificity in pleading before allowing a case to proceed. Turning to the substance of Twombly's complaint, the majority held that it did not plausibly suggest conspiracy, as none of the allegations suggested that the ILECs' conduct was anything more than a "natural, unilateral reaction" of each ILEC to maintain its regional dominance and to sit tight in its own market.
Justice Stevens dissented, joined in large part by Justice Ginsburg. For Stevens, the case was easy. Parallel conduct, while not itself illegal, is circumstantial evidence of conspiracy (as the majority conceded), and Twombly had alleged that the ILECs' parallel conduct had resulted from an agreement. The conduct alleged was consistent with illegal conspiracy, and the Court wrongly had made a judicial determination of plausibility rather than require the ILECs even to answer the complaint, much less submit to discovery. Instead, their lawyers needed only to file a motion to dismiss stating that everything was hunky-dory, leading Stevens to lament "that the unfortunate result of the majority's new pleading rule will be to invite lawyers' debates over economic theory to conclusively resolve antitrust suits in the absence of any evidence." Stevens gave a lengthy defense of the Conley "no set of facts" rule, which the Court had previously cited numerous times with approval and which was fully consistent with the federal courts' (and many states') abandonment of fact pleading for notice pleading. He also noted that in antitrust cases, where proof often lies in the hands of alleged conspirators, it is bad policy to blindly allow dismissals before discovery. Stevens also wrote that, even under the majority's wrongheaded "plausibility" standard, Twombly's complaint should have survived given its allegations of parallel conduct and the ILECs numerous opportunities to meet and confer. Finally, Stevens wrote that while concern over the cost of discovery might be valid, it merits careful case management, not summary dismissal of a well-pleaded complaint. In a section of his dissent not joined by Ginsburg, he went on to note that the Court was rejecting the intent of the drafters of the Sherman Act, the Telecommunications Act, and the Federal Rules, all to save antitrust defendants – "some of the wealthiest corporations in our economy" – from the costs of discovery, a break from precedent that could only be explained by a lack of trust in district courts to manage discovery.
Turning from antitrust to education, in Winkelman v. Parma City School District (05-083), a seven-member majority led by Justice Kennedy held that parents have an independent, enforceable right under the Individuals with Disabilities Education Act (IDEA) to a free appropriate public education (FAPE). Common law generally precludes parents from proceeding pro se to enforce rights of their children, but individuals always can proceed without counsel to enforce their own rights. The upshot of the Court's ruling is that parents can now sue pro se under IDEA if they believe their child has been denied a FAPE. Parents are instrumental in developing their child's Individualized Education Plan (IEP), which is the core right of IDEA. And parents clearly have the ability to challenge the adequacy of an IEP in administrative proceedings, unaided by counsel. IDEA provides that "[a]ny party aggrieved by the [hearing officer's] findings and decision" may file a civil action. Parents, who are parties, therefore should be able to do so. Additionally, IDEA permits parents to obtain certain remedies in a civil action: reimbursement for private school tuition when a district fails to provide a FAPE and attorneys fees where a parent is the prevailing party. Finally, it would be inequitable to permit only those parents who could afford private school tuition (and therefore clearly have a right to bring an action for reimbursement) to challenge the adequacy of their child's education. The most vulnerable parents then might be denied access to the courts.
Justice Scalia, joined by Justice Thomas, dissented. For them, while IDEA explicitly gives certain rights to parents, the substantive right to a FAPE belongs to the child alone. "The Court's spraying statutory sections about like buckshot cannot create a substantive parental right to education where none exists." Since parents have no independent right to a FAPE, they cannot be considered aggrieved parties (unlike in an action for reimbursement). Therefore, they cannot bring suit pro se to enforce their child's right – they must hire counsel.
In Hinck v. United States (06-376), a unanimous Court held that the Tax Court has exclusive jurisdiction over challenges to an IRS decision not to abate interest penalties on back taxes. Section 6404 of the Internal Revenue Code allows the Secretary of the Treasury to abate an interest charge if it is due to the IRS's own delay in reviewing a case. Before 1996, the Code said nothing about judicial review of that decision, and courts had uniformly held that it was an exercise of complete agency discretion insulated from court challenge. That changed in 1996, when Congress amended section 6404 to include a provision that "The Tax Court shall have jurisdiction . . . to determine whether the Secretary's failure to abate interest under this section was an abuse of discretion." Hinck brought such a challenge, but he brought it in the Court of Federal Claims, which usually hears post-payment claims on tax matters, arguing that the new provision did not give the Tax Court exclusive jurisdiction but only concurrent jurisdiction. The Court unanimously disagreed, in a characteristically efficient opinion by the Chief. In essence, the Court fell back on the principle that a "precisely drawn, detailed statute preempts more general remedies," particularly when Congress has created a remedy where none previously existed – all conditions that applied here.
The Court dismissed for lack of jurisdiction in Office of Senator Mark Dayton v. Hanson (06-618). Hanson, a former employee of Senator Dayton, sued his Office under the Congressional Accountability Act of 1995, which makes certain federal employment laws applicable to Congress. The (now former) Senator moved to dismiss, claiming immunity under the Speech and Debate Clause of the Constitution, which provides: "[F]or any Speech or Debate in either House, [the Senators and Representatives] shall not be questioned in any other Place." The district court denied the Senator's motion and the D.C. Circuit affirmed. The Senator then appealed to the Court under section 412 of the CAA, which allows direct appeal from an order "upon the constitutionality of any provision of [the CAA]."
Justice Stevens authored the Court's unanimous opinion (in which the Chief did not participate) dismissing the case. (Who says seniority has no benefits? Stevens can take credit for a majority opinion penned in just four pages!) The district court's order, which did not state the rationale for denying the Senator's motion to dismiss, was not a ruling on the constitutionality of the Act. Similarly, the Court of Appeals did not address the validity of the CAA, ruling only that requiring Senator Dayton to defend the action did not necessarily contravene the Speech and Debate Clause, even though the Clause might limit the proceedings in some respects. Further, the CAA expressly states that it was not intended to waive immunity provided by the Clause. Therefore, the lower courts' decisions were best viewed as "ruling[s] on the scope of the Act, not its constitutionality." So Section 412 jurisdiction was unavailable, and as there were no special circumstances to justify granting cert, the Court dismissed.
Los Angeles County v. Rettele (06-605) has some practical advice for us all: Wear pajamas to bed. Rettele, his girlfriend Sadler, and her son Hall were home sleeping when L.A. County deputies executed a warrant to search their home. The deputies were investigating four African American suspects involved in an identity-theft crime ring and had a valid warrant to search the home where some of the suspects had resided. (The operative word here: had. Unbeknownst to the deputies, the suspects had since moved on and Rettele, Sanders and Hall – all Caucasian – had moved in.) When the deputies knocked and announced, Hall answered. Deputies then entered the home, found Rettele and Saunders naked in bed, and held them at gunpoint for a few minutes while they searched the home before allowing them to dress. Rettele and the others sued under 42 U.S.C. § 1983, asserting violations of their Fourth Amendment right to be free from unreasonable searches and seizures. The district court granted summary judgment for the deputies, but the Ninth Circuit reversed, finding that the deputies violated respondents' Fourth Amendment rights and were not entitled to qualified immunity because a reasonable deputy would have stopped the search upon discovering that the respondents were of a race different from the suspects.
In a per curiam decision, the Court reversed. Six of the Justices found that the deputies' conduct was not a violation of the Fourth Amendment because officers acting pursuant to a valid search warrant can take reasonable actions to secure a premises and ensure their own safety. There was no indication that the deputies detained Rettele and Sadler any longer than necessary, and the deputies permitted them to dress within a few minutes. The fact that they were not the same race as the suspects did not require the deputies to halt their search immediately because people of different races frequently live together and may engage in crime together. Justices Stevens and Ginsburg concurred in the judgment only. They would have reversed the Ninth Circuit's decision on the ground that the deputies had qualified immunity since the law regarding this type of detention was not clearly established, rather than reaching the constitutional question of the legality of the search itself. Justice Souter, for his part, would not have granted cert on the case at all, but wrote no separate opinion.
Finally, the Court dismissed cert as improvidently granted in Roper v. Weaver (06-313), which concerned the Eighth Circuit's decision to set aside Weaver's death sentence because of the prosecutor's inflammatory statements during closing argument. The Court had granted cert out of concern that the Eighth Circuit did not review Weaver's habeas petition under the strict standard of review required by the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), but it let the Eighth Circuit ruling stand after learning the rather sad history of Weaver's case. After being convicted in state court and losing his appeals, Weaver had sought cert in the U.S. Supreme Court. He also filed a habeas petition in the federal district court before AEDPA went into effect, but that court dismissed the petition without prejudice as premature in light of Weaver's cert petition. That ruling was wrong, however, in light of the Court's recent decision in Lawrence v. Florida (see our February 22, 2007 Update), which held that a prisoner need not seek certiorari to exhaust state court remedies prior to filing a habeas petition. And because of the district court's error, after the Court denied cert Weaver had to file a new habeas petition after AEDPA's effective date that was thus subject to AEDPA's more stringent standard of review. The Court just couldn't stomach this result – particularly since Weaver's codefendant had obtained pre-AEDPA habeas relief due to the same prosecutorial misconduct – so in an act of compassion they let the Eighth Circuit's decision stand. The Chief penned an oblique one-sentence concurrence in the result indicating that he did not agree with all the reasons in the per curiam decision, but he did agree with the result.
Justice Scalia dissented, joined by Justices Thomas and Alito. They agreed that Weaver was disserved by the district court's error in dismissing his first habeas petition, but they would not absolve him from complying with AEDPA. Weaver could have sought further review of the district court's dismissal of his first petition, but he "simply gave up too early." More fundamentally, there is no relief available for "the collateral consequences of uncorrected judicial error." This is simply part of the system that we live with. Given that AEDPA does apply to Weaver's current petition, it makes no sense to dismiss a fully briefed and argued case, particularly when doing so allows an erroneous Eighth Circuit decision to stand. The dissent warns that other courts "would be well advised to do unto the Eighth Circuit's decision just what it did unto AEDPA: ignore it."
The Court also granted cert in three cases . . .
Department of Revenue of the Commonwealth of Kentucky v. Davis (06-666): Whether a state violates the dormant Commerce Clause [again with the dormant Commerce Clause] by providing an exemption from its income tax for interest income derived from bonds issued by the state and its political subdivisions, while treating interest income realized from bonds issued by other states and their political subdivisions as taxable to the same extent, and in the same manner, as interest earned on bonds issued by commercial entities, whether domestic or foreign.
Klein & Co. Futures, Inc. v. Board of Trade of City of New York (06-1265): Whether the court of appeals erred in concluding that futures commission merchants lack statutory standing to invoke [a private right of action under the Commodity Exchange Act] because, in the court's view, they do not engage in such transactions, despite the statutory requirement that the merchants enter into and execute their transactions on, and subject to the rules of, a board of trade and the fact of the merchants' financial liability for the transactions.
Danforth v. Minnesota (06-8273): Are state supreme courts required to use the standard announced in Teague v. Lane, 489 U.S. 288 (1989), to determine whether United States Supreme Court decisions apply retroactively to state-court criminal cases, or may a state court apply state-law- or state-constitution-based retroactivity tests that afford application of Supreme Court decisions to a broader class of criminal defendants than the class defined by Teague?
. . . and asked the SG to weigh in on two others:
General Electric Co. v. Commissioner (06-1210): You guessed it, another dormant Commerce Clause case – Does the New Hampshire business profits tax regime facially discriminate against foreign commerce in violation of the Commerce Clause by providing a tax deduction for dividends received from foreign subsidiaries only to the extent that the foreign subsidiary conducts income-generating business in the State, a restriction virtually identical to restrictions struck down by this Court in Fulton Corp. v. Faulkner, 516 U.S. 325 (1996), and by state courts of North Dakota and California?
Wyeth v. Levine (06-1249): Whether the prescription drug labeling judgments imposed on manufacturers by the Food and Drug Administration ("FDA") pursuant to FDA's comprehensive safety and efficacy authority under the Federal Food, Drug, and Cosmetic Act preempt state law product liability claims premised on the theory that different labeling judgments were necessary to make drugs reasonably safe for use.
That is likely all for this week. Until next time, thanks for reading!
Ken & Kim

From the Appellate Practice Group at Wiggin and Dana
For more information, contact Kim Rinehart, Ken Heath, Aaron Bayer, or Jeff Babbin at 203-498-4400