The Seventh Circuit Court of Appeals has further refined its approach to the appealability of lower court determinations as to the sufficiency of the pleadings under the U.S. Supreme Court’s new plausibility pleading standards in a case alleging a conspiracy to fix the prices of text messaging services in violation of federal antitrust law. In re: Text Messaging Antitrust Litig., No. 10-8037 (7th Cir., decided December 29, 2010).
The lower court issued an order allowing the plaintiffs to file a second amended complaint after determining that the original complaint and first amended complaint did not plead sufficient facts to withstand a motion to dismiss. The defendants asked the court to certify for interlocutory appeal the question of the second amended complaint’s adequacy, and the court agreed. Because the law also requires that the appeals court grant permission to appeal, the defendants sought that permission, “and the plaintiffs urge us to turn them down,” arguing that the proposed appeal does not present a ‘controlling question of law.’”
Initially noting that the question presented is controlling, “because if the second amended complaint does not state a claim, the case is likely (though, as the district judge said, not certain) to be over,” the court queried whether it is a “controlling question of law.” According to the court, the defendants “are asking us to apply a legal standard—the pleading standard set forth in Twombly—to a set of factual allegations taken as true for purposes of the appeal.” Because “the question requires the interpretation, and not merely the application, of a legal standard—that of Twombly,” because the scope of that opinion is unsettled and the court had “only twice discussed the application of Twombly to antitrust violations, and in both cases only in passing,” the court said it was justified in concluding that the appeal presented a genuine question of law.
The court was also concerned that if a district court misapplied the standard, defendants would be unnecessarily put to the burden of responding to at least a limited discovery demand. “When a district court by misapplying the Twombly standard allows a complex case of extremely dubious merit to proceed, it bids fair to immerse the parties in the discovery swamp—‘that Serbonian bog … where armies whole have sunk’ (Paradise Lost ix 592-94)—and by doing so create irrevocable as well as unjustifiable harm to the defendant that only an immediate appeal can avert. Such appeals should not be routine, and won’t be, because as we said both district court and court of appeals must agree to allow an appeal under section 1292(b); but they should not be precluded altogether by a narrow interpretation of ‘question of law.’”
While the plaintiffs had not alleged any direct evidence of price fixing, such as an employee’s admission, the Seventh Circuit agreed with the district court that “the second amended complaint provides a sufficiently plausible case of price fixing to warrant allowing the plaintiffs to proceed to discovery.”