High court weighs Baby Bell lawsuit

Supreme Court justices pressed both sides Monday in the oral arguments of a case that businesses of all stripes care deeply about: How hard should it be to get evidence that a company might be violating antitrust laws?

The case, Bell Atlantic vs. Twombly, stems from the deregulation of the telecommunications industry in the 1980s and 1990s, with some experts citing it as the most important antitrust case to reach the Supreme Court in 20 years.

The case involves a 2003 lawsuit on behalf of William Twombly and all individuals in the continental United States who bought local telephone and Internet service from February 1996 to the present.

The suit alleged that the incumbent local telephone companies, or Baby Bells, illegally conspired to prevent competition by excluding new local phone companies from their territories and agreeing not to compete against one another in one another’s markets.

Justice John Paul Stevens pressed Michael Kellogg, the attorney arguing the case for the phone companies, on why such allegations were not sufficient for the original case to continue.

“How you can say this is not an allegation of fact, I find mind-boggling,” Stevens commented.

A federal district court had dismissed Twombly’s case, finding that Twombly did not allege sufficient facts to indicate that a conspiracy would probably be proved during a trial. But Twombly appealed, arguing that a conspiracy could be inferred from the so-called parallel conduct or behavior of the defendants.

The 2nd Circuit Court of Appeals reversed the district court, finding in October 2005 that a plaintiff must submit a “short and plain statement of the claim” and not a detailed set of facts to survive a motion to dismiss.

Before the case went to trial, the Baby Bells appealed to the Supreme Court, and Justice Stephen G. Breyer noted that under the standard upheld by the appeals court, “you can go sue half the firms in the economy.”

Business groups also contend that a low standard would enable meritless and abusive cases to go forward, forcing many businesses to settle rather than endure the expense of litigation, including the discovery process in which defendants must produce documentation of certain facts for the plaintiff.

A higher standard, however, could make it too difficult for individuals to bring valid antitrust cases, Twombly argued, because the only way a plaintiff can get evidence of an agreement among companies to restrict competition is through the discovery process.