Iqbal, Twombly, and the Expected Cost of False Positive Errors

66 Pages Posted: 6 Feb 2010 Last revised: 14 Feb 2012

See all articles by Max Huffman

Max Huffman

Indiana University Robert H. McKinney School of Law

Mark Anderson

University of Idaho

Date Written: February 4, 2010


Iqbal and Twombly introduced a new standard for pleading federal claims, overruling five-decades old language from Conley v. Gibson. Instead of plaintiffs’ being entitled to discovery unless the complaint affirmatively forecloses the possibility of recovery, Iqbal and Twombly require a more searching evaluation of the complaint under an ambiguous “plausibility” standard. The policy behind this increased burden on plaintiffs is to prevent the false positive error that burdensome discovery creates. How the plausibility standard from Iqbal and Twombly should operate in the real world is poorly understood. There is general acknowledgement that no clear guidance exists about how to ensure only plausible inferences are indulged. Professor Josh Davis recently summed up the sentiments: “Twombly is a very confusing decision. I really do think… it’s going to be a while before we get a rule that produces predictable results.” Professor Adam Steinman is more hyperbolic: “thanks to” Twombly and Iqbal, “federal pleading standards are in a crisis.”

This article fills the void in scholarly and judicial thought by providing an understanding of the Twombly/Iqbal pleading standard that is both theoretically sound and pragmatic. Our approach turns on the policy underlying Iqbal and Twombly – a concern that permitting the case to proceed past the motion to dismiss creates a high expected cost of false positive error through non-merits-based settlements. The expected cost of false positive error is a function of two variables: the cost to society if the error occurs and the likelihood that the error will occur. The cost to society if false positive error occurs varies among different areas of substantive law. The likelihood that false positive error will occur varies by the type of facts in controversy. We use antitrust law as an example of the effects of those two variables. Because false positive error in antitrust is costly to society, the analysis focuses on the likelihood of false positive error.

The likelihood of false positive error depends on the nature of facts in controversy and the manner in which proof of those facts will be made. If evidence of contested facts is uniquely in the defendant’s hands, it can be retrieved (or its absence shown) only through burdensome, and asymmetrical, discovery of the defendant. If evidence of contested facts is public or quasi-public in nature, it can be gathered without disproportionate burden being placed on the defendant. Whether discovery will be disproportionately burdensome on the defendant will affect the defendant’s incentive to settle. Settlements to avoid burdensome discovery result in false positives. Using antitrust law as an example, we demonstrate that different elements of different substantive claims give rise to different likelihoods of false positives. This approach is trans-substantive, and the same inquiry we conduct should be conducted for any claim brought in federal litigation. This analysis resolves the uncertainty left in the wake of Twombly and Iqbal.

Keywords: Pleading, Antitrust, Conspiracy, Twombly, Iqbal

JEL Classification: K21, K41

Suggested Citation

Huffman, Max and Anderson, Mark, Iqbal, Twombly, and the Expected Cost of False Positive Errors (February 4, 2010). Cornell Journal of Law and Public Policy, Vol. 20, No. 1, 2010. Available at SSRN: or

Max Huffman (Contact Author)

Indiana University Robert H. McKinney School of Law ( email )

530 West New York Street
Indianapolis, IN 46202
United States

Mark Anderson

University of Idaho ( email )

P.O. Box 442321
Moscow, ID 83844-2321
United States

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