Pleadings Standards

  • December 21, 2011
    Guest Post

    By Jonah Gelbach, a senior research fellow at the Yale Department of Economics Program in Applied Economics and Policy and a Yale Law School student.

    The Supreme Court’s 2007 and 2009 opinions in Bell Atlantic v. Twombly and Ashcroft v. Iqbal upended Conley v. Gibson’s famous rule that a complaint attacked by a Rule 12(b)(6) motion to dismiss for failure to state a claim should be dismissed only if there is no set of facts under which the complaint’s claims could entitle the plaintiff to relief. Instead, Twombly and Iqbal require a plaintiff’s complaint to include allegations making entitlement to relief not just logically possible, but plausible.

    Critics have attacked Twombly and Iqbal for both raising pleading standards and injecting subjectivity into Rule 12(b)(6) adjudication. Kevin Clermont and Stephen Yeazell characterize the post-Iqbal situation as “Pleading Left Bleeding.” Civil rights and employment discrimination cases have raised special concern. Their plaintiffs might be especially unable to meet elevated pleading standards without discovery, setting up a need-discovery-to-get-to-discovery Catch-22. Joshua Civin & Debo P. Adegbile wrote in an ACS issue brief that Twombly and Iqbal might “create an undesirable safe harbor that effectively places some defendants beyond the reach of civil rights laws.”

    Not everyone is disappointed, to be sure. For example, attorneys Mark Herrmann and James Beck have written that “out-of-control litigation prompted the Supreme Court in Twombly to adjust the threshold pleading requirements for unleashing the legal process.”

    Normative questions aside, some observers cite a report the Federal Judicial Center (FJC) issued in March 2011 for the proposition that Twombly and Iqbal haven’t actually affected much. The report found that “there was no increase in the rate of grants of motions to dismiss without leave to amend,” including among civil rights and employment discrimination cases.

    But the FJC report also found that the share of filed lawsuits that face a Rule 12(b)(6) motion to dismiss increased substantially after Twombly and Iqbal — more than 50 percent --  depending on the type of lawsuit involved. In my paper, “Locking the Doors to Discovery?,” forthcoming as a student Note in volume 121 of the Yale Law Journal, I argue that the increase in the proportion of Rule 12(b)(6) filings is evidence of a “defendant selection effect.” Defendants who are more confident of victory at the 12(b)(6) stage will file motions to dismiss against cases that are more strongly pleaded and that the defendants would have answered before Twombly/Iqbal. Clermont and Yeazell express this point colorfully, writing that a defense attorney “commits legal malpractice if he or she fails to move to dismiss with liberal citations to Twombly and Iqbal.”

    Thus, defendant selection should increase the average quality of complaints that face Rule 12(b)(6) motions to dismiss after Twombly/Iqbal. Given that there was little change in the rate at which these motions to dismiss were granted, the result is that the FJC report is actually powerful evidence in favor of the contention that Twombly and Iqbal have had a substantial impact. If defendants file motions to dismiss against a stronger set of complaints but win just as often, then judges must be dismissing complaints that they would not have dismissed before. The end result is that more cases fail to reach discovery than would have before Twombly and Iqbal.

    In my paper, I use an economic model to try to quantify the impact that Twombly and Iqbal have had in preventing claims from reaching discovery.

  • August 3, 2011

    by Nicole Flatow

    Access to the courts is under assault on a number of fronts, at a time when more and more people have legal issues arising from the economic downturn, The Huffington Post reports.

    At the state level, slashed state court budgets have become a serious concern, resulting in significant staff resource cuts, reduced operating hours, increased fees and cases delayed for as long as ten years. “[M]any court advocates bristle that the third branch of government is being treated as nothing more than a state agency begging for scraps,” the article notes.

    Meanwhile, “the attack on courts at the state level is coinciding with one of the worst federal judicial crises the country has seen,” the article explains. Just last night, the Senate recessed for a full month without voting on 20 fully vetted nominees.

    Then there are legal services organizations, which are suffering blows in federal, state and private funding. While the economic downturn meant cuts to local and state funding for many organizations, and a loss of other sources of revenue such as Interest on Lawyer Accounts and private donations, the House Appropriations Committee has proposed a 26-percent cut to the Legal Services Corporation budget, which would require legal services organizations to turn away some 235,000 people, according to LSC estimates.

    All of this means that people coming into the court system without representation have nowhere to turn for help.

    “When people don't have a lawyer to represent them and explain the court system's complicated procedures to them, they need extra assistance from judicial staff -- who are now in short supply because of the budget cuts,” the article explains.

  • July 12, 2011
    Video Interview

    The Supreme Court continues to limit the ability of people to seek justice in the courts, Public Citizen’s Allison Zieve tells ACSblog. Zieve cited as an example, the high court’s April opinion in AT&T Mobility v. Concepcion, which found in favor of AT&T’s effort to bar consumers from joining in a class action to challenge the wireless company’s charges.

    In an interview following ACS’s 2010 – 2011 Supreme Court Term Review, Zieve, litigation director for Public Citizen, said:

    It seems to me that the court is consistently unsympathetic to class action suits, to broader suits and has a distinct anti-litigation trend in a lot of its cases. The Court doesn’t seem to feel that state law claims, tort claims, consumer protection claims, have a lot of value, and so not only do plaintiffs frequently lose in those cases, they do so through opinions that don’t really show much respect for the civil justice system. So, I think that raises a significant concern about people’s ongoing access to the courts, access to court remedies. There’s a lot of situations in which state law provides the only remedy, and the Supreme Court has been cutting those access to the court system off through a very sympathetic view of arbitration, a broad reading of the federal arbitration act, through preemption, standing requirements that have been made more and more stringent over the years; so there’s a lot of ways the courthouse doors are being closed to just regular people.

    For more analysis and information about corporate interests before the Supreme Court and other federal courts, visit a the ACS Web Page, Corporations and the Courts, with resources that include two ACS Issue Briefs, “Why Does Business (Usually) Win in the Roberts Court?,” “Judicial Hostility to Litigation and How it Impairs Accountability for Corporations and Other Defendants,” and a recent article from the official ACS Journal, the Harvard Law & Policy Review, called “Class Action at the Crossroads: An Answer to Wal-Mart v. Dukes.”

    Watch Zieve’s interview below or download a video podcast of the interview. The interview can also be seen here.

  • June 29, 2011

    The Supreme Court in a decision issued earlier this month may have blocked one route for stockholders to challenge corporate fraud, but in doing so, may have “inadvertently left open a far more dangerous path for the plaintiffs’ bar: claims under the Racketeer Influenced and Corrupt Organizations Act, or RICO,” writes Howard A. Fischer for Thomson Reuters Accelus.

    Fischer, a senior trial counsel in the New York Regional Office of the Securities and Exchange Commission, analyzes the 5-4 decision in Janus Capital Group, Inc. v. First Derivative Traders, and concludes that the high court majority led by Justice Clarence Thomas may have unwittingly provided “the plaintiffs’ bar with a potential weapon far more powerful than the one it takes away. The Supreme Court appears to have ignored the warning of George Santayana that those who cannot learn from history are doomed to repeat it.”

  • May 16, 2011
    Guest Post

    By Reuben Guttman.  Mr. Guttman, a partner at the law firm of Grant & Eisenhofer, heads the firm's whistleblower practice and is founder of the website Whistleblowerlaws, which helps individuals using the False Claims Act to seek compliance with environmental, affirmative action, wage and hour, and "Buy American" requirements. It was cited as an authority by the Chamber of Commerce in its brief in Schindler Elevator Corp. v. U.S. ex rel. Kirk, which the U.S. Supreme Court today issued an opinion. Mr. Guttman is also a Senior Fellow and Adjunct Professor at the Emory Law School Center for Advocacy and Dispute Resolution.

    With the heightened pleading standard established by the Supreme Court in Twombly and Iqbal, it must follow that Plaintiffs are entitled to some accommodation in the manner and methods used to muster the facts now required to properly plead a case. Apparently this is not so.

    In issuing its 5-3 decision (Justice Kagan did not take part in the decision) in Schindler Elevator Corp. v United States, No. 10-188 (May 16, 2011), the Court held that a whistleblower litigating under the Federal False Claims Act (FCA) does not have standing if his or her claims are based on information secured from a Freedom of Information Act (FOIA) request. The FCA precludes whistleblowers from basing claims on government "reports" and in Schindler, the Court had to decide whether the Government’s response to a FOIA request constituted a government report. Justice Thomas opined that because a response to a FOIA request provides information, it must therefore be a "report" within the meaning of the statute. While this may be good news for college students seeking support for the proposition that a one page document suffices as a term paper or report, it is indeed a blow to whistleblowers seeking redress from private contractors that cheat the government.    

    The whistleblower in Schindler, Daniel Kirk, a Vietnam Veteran, claimed that his employer, a government contractor, failed to honor a veterans job preference, which in turn violated a government contract.  In support of efforts to prove his claims, Schindler's wife secured information from the Department of Labor (DOL) through a FOIA request. Mrs. Kirk’s efforts, according to the Court's opinion, proved fatal to the complaint.

    The False Claims Act's public disclosure bar is designed to preclude the filing of parasitic lawsuits or lawsuits based on public information readily known to the government. Specifically, the statute bars suits based on government audits and reports. If a government agency issues a report documenting fraudulent conduct by a contractor, it would make sense that a private citizen should not be able to use that report, file a lawsuit, and claim a bounty for bringing attention to that which is already known. But a response to a FOIA request is different. First, as a document generated at the behest of a private citizen, it would never be revealed if the private citizen did not know to ask for it. Second, the document may only provide raw data or information absent any analysis and its relevance may only be understood by the individual seeking the information. As Justice Ginsburg noted in her dissent, quoting the Opinion of the Second Circuit which was reversed, the Department of Labor's responses "did not synthesize the documents or their contents with the aim of itself gleaning any insight or information, as . . . It necessarily would in conducting a 'hearing" or 'audit.' "

    The truth is that Daniel Kirk, the relator in Schindler, was doing exactly what the Court in Iqbal and Twombly required of him; he was mustering very precise facts in order to plead a case. And though he may have filled his complaint with some facts secured from the government itself, there is no evidence that the government was able to put the pieces together absent his aide. 

    With so much public money being injected into the private sector these days and with insufficient oversight of contractors, does this case -- like other recent Supreme Court decisions -- merit corrective legislation? As Justice Ginsburg noted in her dissent: "[a]fter today's decision, which severely limits whistleblower's ability to substantiate their allegations before commencing suit, that question is worthy of Congress' attention."