The Economics of Motions to Dismiss: An Economists View of the Twombly/Iqbal Standard

Abstract

The Bell Atlantic v Twombly and Ashcroft v Iqbal Supreme Court opinions refined the threshold for motions to dismiss claims. In elaborating on these thresholds, the Court discussed the legal interplay of “possibility,” “plausibility,” and “probability.” The Court emphasized that claims must go beyond a recitation of theories or legal standards and rely on some level of factual allegations. Since the Iqbal decision, numerous lower courts have applied the newly articulated Twombly/Iqbal standards. Legal practitioners have argued that there are inconsistencies between courts when evaluating the scope and application of these standards. In order to help resolve this murkiness, this paper suggests a structured methodology that can be employed when arguing a motion to dismiss. A number of tools that can be used to evaluate the likelihood of success are proposed. We posit “strong” and “weak” conditions for meeting the Twombly/Iqbal standards. The “strong” conditions for surviving a motion to dismiss are satisfied if well articulated conditions that meet the logical concept of sufficiency along with supporting facts are presented. If these strong criteria are not met, claims can still survive a motion to dismiss, but will be more likely to survive the closer the claims are to the logical concept of “sufficiency.” Under the “weak criteria,” the more “unlikely” are the claims (and supporting facts) to exist in the absence of a violation, the greater the probability of survival. In other words, the more strongly linked are the underlying claims with the alleged violations, and not other possible explanations, the more likely the claims are to survive the motion being adjudicated.