Deterrence Effects Under Twombly: On the Costs of Increasing Pleading Standards in Litigation

11 Pages Posted: 27 Mar 2014 Last revised: 28 Jul 2016

See all articles by Sergio J. Campos

Sergio J. Campos

University of Miami School of Law

Christopher Cotton

Queen's University, Department of Economics

Cheng Li

Mississippi State University

Date Written: February 1, 2015

Abstract

We develop a stylized game theoretic model of litigant behavior to study the effects of increased pleading standards on incentives to engage in illegal activity. Such a model is necessary to build intuition about the potential costs associated with the procedures set forth by the U.S. Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009), which increase the standard of plausibility that lawsuits must meet before being allowed by a judge to proceed to discovery and trial. We show how increasing pleading standards tends to increase illegal activity, and can increase litigation costs. These negative effects should be accounted for when setting a pleading standard. Our results provide a counterpoint to the U.S. Supreme Court’s argument that increased plausibility requirements will decrease the costs of litigation.

Keywords: pleading, plausibility, deterrence, enforcement, motion to dismiss, Ashcroft v. Iqbal, Bell Atlantic Corp. v. Twombly, Rule 8(a)(2), Rule 12(b)(6)

JEL Classification: D61, K41

Suggested Citation

Campos, Sergio J. and Cotton, Christopher and Li, Cheng, Deterrence Effects Under Twombly: On the Costs of Increasing Pleading Standards in Litigation (February 1, 2015). International Review of Law and Economics, Vol. 44, 2015, Available at SSRN: https://ssrn.com/abstract=2416435 or http://dx.doi.org/10.2139/ssrn.2416435

Sergio J. Campos (Contact Author)

University of Miami School of Law ( email )

1311 Miller Drive #380
Coral Gables, FL 33146
United States
3052845899 (Phone)

Christopher Cotton

Queen's University, Department of Economics ( email )

Dunning Hall 230
Kingston, Ontario K7L 3N6
Canada

HOME PAGE: http://www.christophercotton.ca

Cheng Li

Mississippi State University ( email )

PO Box 9580
McCool 312
Mississippi State, MS 39762
United States

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