I have always struggled–conceptually and pedagogically–with the piece of Twiqbal that considers “obvious alternative explanations” as part of “plausibility.” It provides that a complaint fails to cross the line from possible to plausible if there is an obvious alternative explanation for a set of facts other than unlawfulness. Thus, a complaint alleging the mass arrest of thousands of Muslim men does not plausibly show religious discrimination given the obvious alternative explanation of a desire to keep the U.S. safe from those who committed 9/11.
This seems inconsistent with the 12(b)(6) requirement that the court take the facts as true and draw all reasonable inferences in favor of the plaintiff. Looking for an alternative explanation reflects the opposite–the court searching for inferences to draw against the plaintiff. It somewhat fell by the wayside as–as Adam Steinman and Alex Reinert show–the Court has applied something closer to historic notice pleading than to the full version of Twiqbal. Most lower courts do not speak of alternative explanations.
And the Court at least arguably interred it as a concept two terms ago in NRA v. Vullo. The government defendant asserted an obvious alternative explanation for its negotiations with the insurers–“pursuing conceded violations of the
law”– that rendered not plausible the NRA’s claim of First Amendment jawboning. The Court declined to “credit” this assertion, citing the requirement that the Court assume the well-pleaded allegations to be true.
But then comes Thursday’s unanimous decision (per Justice Jackson) in Hikma Pharmaceuticals v. Amarin Pharma. The case involved an inducement-to-infringe claim by a patent holder against the manufacturer of a generic equivalent. Substantive patent law requires that the inducer took active (even if implicit) steps to encourage direct infringement.
Here is how Jackson describes the pleading standard:
Our well-established federal pleading standards are not
up for debate in this case. In order to proceed to discovery,
a plaintiff must “state a claim to relief that is plausible on
its face.” Bell Atlantic Corp. v. Twombly, 550 U. S. 544, 570
(2007). That plausibility standard “asks for more than a
sheer possibility that a defendant has acted unlawfully.”
Ashcroft v. Iqbal, 556 U. S. 662, 678 (2009). If the complaint
“pleads facts that are merely consistent with a defendant’s
liability, it stops short of the line between possibility and
plausibility of entitlement to relief.” Ibid. (internal quotation marks omitted). Instead, to nudge a claim“across the line from conceivable to plausible,” a plaintiff must plead facts that, if true, “allo[w] the court to draw the reasonable inference that the defendant is liable for themisconduct alleged,” id., at 678, 680 (internal quotation
marks omitted), and to rule out “obvious alternative expla-
nation[s]” for the defendant’s conduct, Twombly, 550 U. S.,
at 567.
It’s back. Or to paraphrase Justice Scalia:
Like some ghoul in a late-night horror movie that repeatedly sits up in its grave and shuffles abroad, after being repeatedly killed and buried, [obvious alternative explanation] stalks our [pleading] jurisprudence once again, frightening the little children and . . . attorneys for Amarin Pharma.
And this was not a throwaway. Jackson identified three reasons why the allegations fail to establish that defendants took affirmative steps to encourage infringement. The first identified an obvious alternative explanation for defendant’s statements–they were complying with the law and with standard industry practices, under which the generic label matches that of the brand equivalent and describes itself as the equivalent. The other reasons focus on the complaint’s failure to allege affirmative (as opposed to passive) encouragement and general doubt that the complaint describes inducement.
So what should we make of this, especially after Vullo?
One possibility: “OAE” rears its ugly head only in certain types of complex cases–antitrust, patent infringement, politically sensitive actions against high-ranking federal officials. As I wrote after Vullo, the Court may have been “more solicitous of the NRA’s free speech claims than of 9/11-detainees’ equal-protection claims during a national-security crisis or consumers’ antitrust claims, and thus less solicitous of New York’s obvious alternative explanations than of John Ashcroft or Bell Atlantic.” The Court was similarly less solicitous of Amarin’s inducement-to-infringe claims and thus more solicitous of Hikma’s obvious alternative explanation.
A better possibility: Although framed as finding an OAE for facts alleged, the Court is really defining the scope of substantive law and finding the claim insufficient in light of that substantive law. As the Court puts it: “We decline to put generic manufacturers between a rock and a hard place by turning adherence to the law and industry standards into building blocks for illegal conduct.” This makes sense as a statement of the substantive law of inducement-to-infringe–no liability when following law and industry standards; that compliance renders Amarin’s claim insufficient. And the court can do this on 12(b)(6) (when limited ot the four corners of the complaint) as to the legal point, since the four corners includes applicable law. It is a bit dicier to do this as to industry standards on 12(b)(6). In essence, the Court took judicial notice of industry standards, treating them as unquestioned background facts incorporated into and thus part of the four corners for 12(b)(6) purposes.
I am not sure if courts should be able to do the latter. Industry standards and practices do not seem the undisputed, unquestioned facts of which a court can take judicial notice–akin to something contained in a judicial record or the shape of the earth or who is President of the United States. Although I think courts do something similar with contract interpretation under the UCC, so perhaps some industry standards are sufficiently established to justify judicial notice. In any event, better that courts play a bit loose with what facts it can take judicial notice of–and be honest in doing that–than make up something such as OAE that undermines the basic point of 12(b)(6).