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2019 U. Chi. L. Rev. Online 1 (2019)

handle is hein.journals/uchidial87 and id is 1 raw text is: 3/18/19 U. Chi. L. Rev. Online *1 How PROBABLE IS PLAUSIBLE? by Daniel A. Epstein See Mr. Epstein's article in the Online Journal here The federal pleading threshold is probably the most confronted, least understood, threshold in American law. We know that to survive a Rule 12(b)(6) motion to dismiss in the post-Twombly and -Iqbal world, a pleading must state a claim to relief that is plausible on its face. But what does that mean? It's totally ambiguous. Contrast that with the best understood threshold in American law, the preponderance of the evidence (POE) threshold. Jurists know so precisely what that means that there is a discrete probability assigned to it: greater than 50%. Can we define the plausibility threshold as precisely as we've defined the POE threshold? In other words, can we figure out how probable is plausible? That's the question my article answers. Or, perhaps more accurately, it answers how probable plausible should be in order to minimize error. And to do that I start with a closer look at the POE threshold. We've known that the POE threshold was greater than 50% for a very long time. But we didn't know why until very recently. It wasn't until the 1980s that Professor David Kaye proved that the POE threshold is optimally located to minimize error (i.e., that overall it minimized the number of dollars being erroneously paid). That seminal discovery by Kaye gave me a foothold to locate the plausibility threshold, except that I started where he finished and worked backwards. Kaye knew the POE threshold's location and discovered the justification. I did the reverse: I assumed that (just like with the POE threshold) the plausibility threshold is optimally located to minimize error and then I derived the formula that allowed me to find its location. The mathematical derivation is laid out in the article, but for the purposes of this piece it's sufficient to understand that in the formula I derive (which I refer to as the pleading-phase error minimizing (or PPEM) model) the plausibility threshold equals expected continuation costs divided by estimated judgment value, plus the probability of erroneously finding liability, plus the probability of erroneously finding no liability. And, fortuitously, we actually have empirical data for some of those variables, meaning we can make an empirically based estimate of the location of the plausibility threshold. Data from the National, Case-Based Civil Rules Survey can be used to estimate that the ratio of continuation costs to estimated judgment size is about 0.122:1. Unfortunately, I wasn't able to find a way to estimate the probability of false findings of liability and no liability, so I couldn't complete the formula, but that 0.122 number is still useful as a lower bound estimate of the plausibility threshold. So, using that number, I conclude that in order to minimize error, courts should on average grant Rule 12(b)(6) motions to

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