January 24, 2014

Twombly and Iqbal on Trial

Ashcroft v. Iqbal, Bell Atlantic v. Twombly, Robert L. Weinberg

by Robert L. Weinberg, Adjunct Faculty, George Washington University Law School and University of Virginia School of Law; former President, District of Columbia Bar; former Partner, Williams and Connolly LLP
On July 3, 2013, the Seventh Circuit rendered the first appellate opinion on the issue of whether Twombly and Iqbal may be applied to adjudicate the sufficiency of federal criminal indictments in United States v. Vaughn. Coincidentally, that same day, ACS released my Issue Brief, “Applying the Rationale of Twombly to Provide Safeguards for the Accused in Federal Criminal Cases.” My Issue Brief analyzed the sufficiency of indictments under the very same criminal conspiracy statute involved in the Seventh Circuit case – 21 U.S.C. Section 846.
In Vaughn, the Seventh Circuit upheld the sufficiency of a bare-bones drug conspiracy indictment charged under 21 U.S.C. Section 846, which would plainly have been invalidated if the court had followed the Twombly holding that the allegation of a “conspiracy” is merely a “legal conclusion” and not a “factual allegation.” Twombly’s holding on this point was reaffirmed in Iqbal. Twombly had dismissed a civil treble damages complaint for violation of a criminal conspiracy statute, the Sherman Antitrust Act.  As Iqbal noted:
“The Court held the plaintiffs’ complaint deficient under Rule 8.  In doing so it first noted that the plaintiffs’ assertion of an unlawful agreement was a ‘legal conclusion’ and, as such, was not entitled to the assumption of truth. Had the Court simply credited the allegation of a conspiracy, the plaintiffs would have stated a claim for relief and been entitled to proceed perforce.
The Seventh Circuit rejected the application of the Supreme Court’s Twombly and Iqbal rulings to criminal indictments, on the theory that the Circuit should not “adopt the civil pleading standards articulated by the Supreme Court…to assess sufficiency of a criminal indictment.”

The Seventh Circuit was correct in rejecting the “plausibility” requirement that Twombly laid down for a civil complaint, since the plausibility of a criminal indictment is determined by the grand jury, not by the trial court. But the Seventh Circuit opinion in Vaughn did not even discuss the other basic pleading rule of Twombly: that pleading “legal conclusions” cannot substitute for pleading “factual allegations.” There is no apparent reason why the language pleaded in a civil complaint should be construed differently from the identical language pleaded in a criminal indictment. Indeed, Twombly was ruling upon the sufficiency of a civil complaint that had attempted to allege the violation of a criminal conspiracy statute, the Sherman Antitrust Act.  In neither case were any “factual allegations” pleaded to support the conclusory allegation of a “conspiracy” – which term is a “legal conclusion,” not an “allegation of fact.”
The indictment in Vaughn was upheld on the basis of prior Seventh Circuit authority in United States v. Singleton that an indictment under 21 U.S.C. Section 846, charging a conspiracy to violate 21 U.S.C. Section 841(a) (the substantive statute proscribing distribution of drugs) “fulfills the requirements of Rule 7(c)(1) and of the Constitution, ‘if it sets forth the existence of a drug conspiracy, the operative time of the conspiracy, and the statute violated.’”
However, if the alleged “existence of a drug conspiracy” is a “legal conclusion” rather than a “factual allegation” – as Twombly and Iqbal held – then such an indictment would plainly fail to meet the requirements of the Federal Rules of Criminal Procedure that the indictment must set forth a statement of “the essential facts constituting the offense.” There would be no such “essential facts” stated in the Vaughn indictment if the “conspiracy” allegation was deemed a “legal conclusion” rather than an “allegation of fact.”
The Seventh Circuit said that its rule on sufficiency of indictments is based upon the Supreme Court’s decision (rendered a few months before the Twombly decision) in United States v. Resendiz-Ponce:
“Here, the criminal indictment meets the requirements outlined by the Supreme Court in Resendiz-Ponce, and we decline to stray from that approach without a change in course undertaken by the Court itself.”
However, the indictment in Vaughn does not satisfy the requirements of Resendiz-Ponce. While that case noted that “an indictment parroting language of a federal criminal statute is often sufficient,” Resendiz-Ponce also approved the standard set forth in Russell v. United States for some more complex charges – that the indictment must be sufficiently specific “to assure that any conviction would arise out of the theory of guilt presented to the grand jury.”
But the assurance thus required by Resendiz-Ponce and Russell, that the petit jury’s conviction must be on the same theory of guilt used by the grand jury, cannot be given under the Vaughn indictment. The Seventh Circuit’s opinion noted that “a jury convicted them largely on the basis of circumstantial evidence.” Yet the indictment did not allege any circumstances whatsoever which the grand jury had found, or that the grand jury had acted on the theory that “circumstantial evidence” established the conspiracy charge. Thus the jury’s verdict on this indictment could not meet the requirement of Russell, as stated in Resendiz-Ponce, that the indictment is specific enough to assure that the jury’s verdict is based upon the same theory as the grand jury. Indeed, Russell also provides that a defendant may not be “convicted on the basis of facts not found by, and perhaps not even presented to, the grand jury which indicted him.”
Thus the Seventh Circuit erred in stating that Resendiz-Ponce would have to be overruled in order to dismiss the indictment in Vaughn. The Twombly requirement to disregard “legal conclusions” in determining the sufficiency of the indictment would be consistent with those cases, such as Russell, where the indictment would have to be more specific than those indictments which “often” sufficed by “parroting the language of a federal criminal statute.”
In any event, the Seventh Circuit’s suggestion that the Supreme Court would need to overrule its prior precedent in Resendiz-Ponce in order to adopt the Twombly rule excluding “legal conclusions” in determining whether the required specific “factual allegations” were present, should itself warrant the Supreme Court’s review at some point, after other Circuits have ruled on similar challenges. Cautious defense counsel may be well advised, when defending conspiracy indictments which do not allege specific underlying facts, to preserve the Twombly challenge by a pretrial motion to dismiss the indictment for failure to charge an offense. Likewise, a Twombly-based challenge should be preserved by motion to dismiss those substantive indictments that would lack the “essential facts” required by Rule 7(c)(1), if their parroted “legal conclusions” were not treated as “factual allegations.”
Moreover, if the Seventh Circuit ought to have dismissed the indictment herein as insufficient under Russell and Resendiz-Ponce, then the Court’s opining that Twombly did not require dismissal appears to be only dictum.
The Supreme Court would not need to overrule its (barely) prior precedent in Resendiz-Ponce in order for the conspiracy allegation here, under 21 U.S.C. Section 846, to be held a mere “legal conclusion,” as was the allegation of a criminal conspiracy pleaded in Twombly.
Resendiz-Ponce and Twombly were decided in the same Supreme Court term, by majorities of 8-1 and 7-2 respectively. So, it seems unlikely that Twombly’s adoption of a rule of construction that an allegation of a criminal “conspiracy” was a “legal conclusion” would be seen by the Court as in conflict with the rules for pleading criminal offenses (including conspiracy) which they had just approved in Resendiz-Ponce four months before.