Thursday, May 28, 2009

In Praise Of “Short And Plain” Pleadings After Twombly And Iqbal

The other day we – allegedly belatedly – posted about the Supreme Court’s decision in Ashcroft v. Iqbal, 2009 WL 1361536 (U.S. May 18, 2009). We say “allegedly” because, whilst Herrmann can blame being out of pocket if he wants, Bexis (although likewise at ALI) doesn’t rely upon that excuse. He believed all along that the prohibition of “anything goes” pleading in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), would apply across the litigation board, and thus he didn’t think that Iqbal was all that big of a deal.

Yeah, we know what you’re thinking. If one of you thinks the issue’s stale, and the other thinks it’s self-evident, why are you bothering with it again?

Well, it turns out (we looked) that Judge Sotomayor has never decided a product liability case involving prescription drugs or medical devices, so one idea for today’s blog post went down the drain.

But more important than that is what we observed in our earlier post on Iqbal. While the other side’s apologists have been out in force gnashing their teeth and rending their clothes, support (at least in the blogosphere) has been sparse for what’s really a quite practical and common-sense pair of decisions. That’s something we can do something about.

We say “pair” because the other side’s complaints are at least as much about Twombly as they are about Iqbal. Since the federal rules of civil procedure are (unless stated otherwise) transubstantive – a law-professor-type word meaning that the same rules apply regardless of the substantive law involved – everything goes back to the original 1937 language of Rule 8, which governs pleadings. For seventy years, Rule 8 has stated that any complaint “must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief.”

The relevant language – “short and plain” – says nothing about dispensing with factual support for the relevant allegations. How can a plaintiff be “entitled to relief” if no facts support the allegations? Nor does Rule 8 even include the term “notice pleading,” a phrased often used as if it were some sort of antidote to the need for facts to bolster mere allegations.

Twenty years later, the Supreme Court, in Conley v. Gibson, 355 U.S. 41 (1957), interpreted Rule 8 as precluding the dismissal of a complaint for failure to state a claim (meaning that the complaint was inadequately pleaded on its face) “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Id. at 46 (citing three circuit courts, but no Supreme Court precedent).

Basically, the capacious Conley standard allowed (among other things) plaintiffs to file complaints that contained nothing but legal conclusions – and then, when challenged, they could ask the court to imagine facts not found anywhere in the complaint in order to defeat a motion to dismiss for failure to state a claim.

The Conley gloss on Rule 8 effectively neutered the provisions of Rule 12(b)(6), that provided for immediate, pre-discovery dismissal of inadequately pleaded complaints.

Well, what’s so bad about that?

Maybe not all that much in 1957, but that was before the advent of modern discovery practice, which came about as a result of other rules changes that began in 1966.

We’re not here to rehash our gripes about discovery (that would take at least a dozen posts), but suffice it to say that the change to unfettered discovery – once plaintiffs learned how to weaponize it – multiplied the cost of litigating cases many times over. In the kind of mass torts that we do, discovery probably amounts to maybe 80% of the effort and 90% of the cost involved in the litigation.

And now electronic discovery, which has become a favorite MDL playground, only multiplies the discovery expense further.

Uncontrolled discovery is a huge part of why these days charges for litigation expenses can make the balance sheets of large, otherwise profitable companies show losses (Don’t believe us? Just google “litigation charge” (we did) and take a look at the results).

The only way to avoid discovery in federal court (the same is true in the states, but this is a federal rules issue) – other than to settle – is to win a motion to dismiss, the same motion that the Conley interpretation of Rule 8 effectively eviscerated.

Conley was the law for fifty years before Twombly came along and gave it a well deserved, if unreasonably delayed, burial.

Twombly involved a conspiracy claim in the anti-trust (restraints of trade) context. It was also a class action – and for triple damages – precisely the sort of litigation that’s large enough to warrant the scorched earth application of all the most expensive and abusive discovery techniques.

What did the plaintiff allege in Twombly as the basis for setting the clanking machinery of modern litigation into motion?

The “ultimate allegation” in Twombly didn’t even purport to be based on any fact. Instead “Plaintiffs allege upon information and belief that [defendants] have entered into a contract, combination or conspiracy to prevent competitive entry.” 550 U.S. at 551.

The key phrase in that sentence is “information and belief.” That’s a fancy way of saying “I don’t know if this is true, but somebody else (usually the person’s lawyer) said it’s true and I believe it.” As the on-line definitions all make clear, “information and belief” is a way to qualify an oath so that, if the statement is untrue, it’s not perjury. It is,

a phrase often used in legal pleadings (complaints and answers in a lawsuit), declarations under penalty of perjury, and affidavits under oath, in which the person making the statement or allegation qualifies it. In effect, he/she says: “I am only stating what I have been told, and I believe it.” This makes clear about which statements he/she does not have sure-fire, personal knowledge (perhaps it is just hearsay or surmise) and protects the maker of the statement from claims of outright falsehood or perjury.

Legaltech on demand.

And in Twombly, that’s all the plaintiff offered as a reason for forcing the defendants to endure millions of dollars of discovery expense – an allegation, not known to be true, that was only one step removed from perjury.

Given the realities modern litigation, it’s no wonder that the Supreme Court retreated from the old Conley any-imaginable-set-of-facts standard. And that’s exactly what the Court held in Twombly:

We alluded to the practical significance of the Rule 8 entitlement requirement . . . when we explained that something beyond the mere possibility of loss causation must be alleged, lest a plaintiff with a largely groundless claim be allowed to take up the time of a number of other people, with the right to do so representing an in terrorem increment of the settlement value. So, when the allegations in a complaint, however true, could not raise a claim of entitlement to relief, this basic deficiency should be exposed at the point of minimum expenditure of time and money by the parties and the court. Some threshold of plausibility must be crossed at the outset before a . . . case should be permitted to go into its inevitably costly and protracted discovery phase.

Thus, it is one thing to be cautious before dismissing [a] complaint in advance of discovery, but quite another to forget that proceeding to antitrust discovery can be expensive. As we indicated over 20 years ago, a district court must retain the power to insist upon some specificity in pleading before allowing a potentially massive factual controversy to proceed.
550 U.S. 557-58 (lots of quotation marks and case citations omitted) (emphasis added).

It’s all about the crushing cost of feeding the litigation beast. With modern, virtually untrammeled discovery, an interpretation of Rule 8 that allowed claims to proceed to that stage, even where they were facially devoid of factual basis, was an expensive luxury that the overburdened legal system could no longer afford. The Court thus rejected the apologists for endless litigation:

It is no answer to say that a claim just shy of a plausible entitlement to relief can, if groundless, be weeded out early in the discovery process through careful case management, given the common lament that the success of judicial supervision in checking discovery abuse has been on the modest side. And it is self-evident that the problem of discovery abuse cannot be solved by careful scrutiny of evidence at the summary judgment stage, much less lucid instructions to juries, the threat of discovery expense will push cost-conscious defendants to settle even anemic cases before reaching those proceedings. Probably, then, it is only by taking care to require allegations that reach the level suggesting [an actionable claim] that we can hope to avoid the potentially enormous expense of discovery in cases with no reasonably founded hope that the discovery process will reveal relevant evidence to support a . . . claim.
550 U.S. 559 (emphasis added). And again:

Given the system that we have, the hope of effective judicial supervision is slim: The timing is all wrong. The plaintiff files a sketchy complaint (the Rules of Civil Procedure discourage fulsome documents), and discovery is launched. A judicial officer does not know the details of the case the parties will present and in theory cannot know the details. Discovery is used to find the details. The judicial officer always knows less than the parties, and the parties themselves may not know very well where they are going or what they expect to find. A magistrate supervising discovery does not – cannot – know the expected productivity of a given request, because the nature of the requester's claim and the contents of the files (or head) of the adverse party are unknown. Judicial officers cannot measure the costs and benefits to the requester and so cannot isolate impositional requests. Requesters have no reason to disclose their own estimates because they gain from imposing costs on rivals (and may lose from an improvement in accuracy). The portions of the Rules of Civil Procedure calling on judges to trim back excessive demands, therefore, have been, and are doomed to be, hollow. We cannot prevent what we cannot detect; we cannot detect what we cannot define; we cannot define “abusive” discovery except in theory, because in practice we lack essential information.

550 U.S. at 560 n.6 (emphasis added) (this is a quote from an article by Judge Easterbrook).

We know from hard experience that the discovery expense in pharmaceutical mass torts is no less – and the standard of pleading no more – than in Twombly. Thus, we had little doubt that Twombly would come to our neighborhood. For instance, we’ve seen more complaints than we can count that allege that the defendant “violated FDA regulations” without stating either what regulation was violated or what the defendant did that allegedly broke the law. That’s what Twombly puts an end to – fishing expeditions – discovery into “any set of facts” that could fit within the bare-bones violation that was pleaded.

Thus Iqbal only confirmed that the federal rules impose a single, transubstantive, set of procedures, which we already knew. Twombly “was based on our interpretation and application of Rule 8. That Rule in turn governs the pleading standard ‘in all civil actions and proceedings in the United States district courts.’” 2009 WL 1361536, at *16 (citations omitted). Even the four dissenters in Iqbal do not dispute the general applicability of Twombly to all types of litigation. Rather, they dispute whether a defense concession as to the substantive law caused the plaintiff’s allegations to satisfy Twombly. 2009 WL 1361536, at *23-24.

Iqbal involved a prison inmate’s allegations that certain government defendants, entitled to qualified immunity from suit, deprived him of constitutional rights by discriminating against him on religious grounds.

According to the Iqbal majority’s more limited view of that defense concession, as in Twombly the plaintiff didn’t plead any actual facts – at least in support of the discrimination aspect of the case. All the plaintiff alleged was that the defendants “knew of, condoned, and willfully and maliciously agreed to subject [him] to harsh conditions of confinement as a matter of policy, solely on account of [his] religion, race, and/or national origin and for no legitimate penological interest.” 2009 WL 1361536, at *14. That allegation was, the majority concluded, “nothing more than a formulaic recitation of the elements of a constitutional discrimination claim.” Id. (quotation marks omitted). Conclusory allegations don’t cut the mustard any longer – not in antitrust, and not anywhere else:

As such, the allegations are conclusory and not entitled to be assumed true. To be clear, we do not reject these bald allegations on the ground that they are unrealistic or nonsensical. . . . It is the conclusory nature of [plaintiff’s] allegations, rather than their extravagantly fanciful nature, that disentitles them to the presumption of truth.

Id. (quote from Twombly omitted – we've quoted it enough).

What’s more, the four Iqbal dissenters “agree that the two allegations selected by the majority, standing alone, do not state a plausible entitlement to relief for unconstitutional discrimination,” id. at *23, but concluded that a defense concession obviated the need to plead the remaining elements. Id. at *25.

In essence, all nine justices agreed in Iqbal that Twombly precludes “bare assertions” and “formulaic recitation of the elements” as being insufficient to state a claim, and further that such allegations do not justify proceeding to discovery. Nobody was disputing the Twombly standard itself any longer – the justices simply divided over whether or not this particular complaint is conclusory in light of the defendants’ concession.

So, then, what of the arguments made by the defenders of anything goes pleading? Well, one thing we hear is that stricter pleading requirements will deter meritorious suits.

We don’t think so.

First of all, this is the same allegation of “Type II” (false negative) error that plaintiffs strenuously reject when we argue that litigation (the aforementioned hundred-million-dollar “litigation charges”) deters the development of new and improved drugs and medical devices. To care more about deterrents to lawsuits than deterrents to potentially lifesaving medical advances suggests misplaced priorities, so that argument has something of a “doth protest too much” air about it – particularly in the sandbox where we play.

But more importantly, we believe that the hallmark of a meritorious case is that it’s factually supported from the get go. Maybe at the outset it’s “only” a product liability case, and not a far more involved negligence per se or conspiracy case, but it’s a case that warrants resort to discovery. A meritorious case is one with an identifiable aspect of a warning that’s arguably inadequate, that has known medical consequences attributable to the alleged defect, and as a result of those consequences, there’s an actual injury. That’s the kind of case that’s entitled to accrue the expense of discovery. If things then turn up that indicate something more afoot, the plaintiff can seek to amend the complaint to allege that something more.

The meritorious case, we think, doesn’t have any Twombly problems to start with – except maybe around the edges should the plaintiff overplead.

A meritorious case is not one where the plaintiff pleads that the product was “defectively designed” and leaves it at that.

Another argument we’ve read is that Twombly and Iqbal are contrary to the forms that are attached to the rules. Those forms “suffice under these rules and illustrate the simplicity and brevity that these rules contemplate.” Fed. R. Civ. P. 84. They “are sufficient to withstand attack under the rules under which they are drawn, and . . . the practitioner using them may rely on them to that extent.” 1946 Comment to Rule 84.

OK – and the forms don’t seem to have been updated since 1946 – even before Conley. There is, for example, a simple three-paragraph complaint (Form 10) for negligence involving a two-car accident. Does anybody (except maybe pro se litigants) actually use this form? We don't think we've ever seen a three paragraph complaint about anything.

There’s certainly no product liability form complaint, no conspiracy form, no negligence per se form, no multi-count complaint of any sort – nothing remotely resembling catch-all, kitchen-sink 25-count complaints of the sort we see today. The forms that come after the rules are simple. They were designed to be that way. They plead things that happened at one particular time and one particular place.

In short, they plead things the way law was practiced (maybe) before the 1966 liberalization of discovery.

Rely on them “to that extent,” as the comment to Rule 84 states. But don’t rely upon them to think it’s proper to plead a 7-year conspiracy (Twombly) or a constitutional violation by “numerous” people (Iqbal) without facts that make the allegations hold together in some plausible fashion. Even these 1946-era forms require “dates” and “places.” In our neck of the woods, for example, if somebody’s going to accuse our clients of “violating” an FDA regulation, s/he had better: (1) tell us what it is (Form 7(b)), tell us who did it and when (all of the forms), and describe how the violation occurred (Form 14(5)).

Other critics trot out the Seventh Amendment right to jury trial. That’s been tried – and failed – as an objection to practically every procedural device that results in dismissal of an action before trial. Summary judgment, for example, was upheld against Seventh Amendment challenge ninety years ago by Justice Brandeis. See Pease v. Rathbun-Jones Engineering Co., 243 U.S. 273, 279-79 (1917). The Seventh Amendment wasn’t even an issue when summary judgment practice was liberalized in Celotex Corp. v. Catrett, 477 U.S. 317 (1986).

And it’s not just summary judgment. “[M]any procedural devices developed since 1791 that have diminished the civil jury’s historic domain have been found not to be inconsistent with the Seventh Amendment.” Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 336 (1979) (discussing collateral estoppel). “In numerous contexts, gatekeeping judicial determinations prevent submission of claims to a jury’s judgment without violating the Seventh Amendment.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 127 S. Ct. 2499, 2512 (2007) (citing Daubert, judgment n.o.v., and summary judgment). In particular, both the courts and Congress have “power to prescribe what must be pleaded to state the claim.” Id. (discussing heightened pleading rules for fraud). Moreover, the federal courts had much more onerous pleading requirements for 150 years before the Federal Rules were adopted. None of those was declared unconstitutional under the Seventh Amendment.

Notably, there were dissents in both Twombly and Iqbal. Not even the dissenting justices raised the Seventh Amendment jury trial right as a basis for disagreeing with the majority. That’s as good a measure as any of the amendment’s inapplicability.

Finally, we’ve also looked at Swierkiewicz v. Sorema N. A., 534 U.S. 506 (2002), which some of the critics mention. In part Swierkiewicz is based on Conley, which the Court cited for the proposition that Rule 8 “relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims.” 534 U.S. at 512. Well, if Twombly settled anything, it’s that. All the block quotes we’ve set out above (there was method to our madness) establish that liberalized discovery is a reason for tougher, not looser, pleading requirements. So to that extent, we have to conclude (and we’re not alone) that Swierkiewicz was impliedly overruled. After all, that opinion cited Conley four separate times, and Twombly (officially rendered transubstantive by Iqbal) firmly relegated Conley to the dustbin of legal history.

That the legal rationale of Swierkiewicz is now impaired doesn’t mean that it’s holding – something about pleading a prima facie case in Title VII cases – is necessarily reversed. For all we know, a requirement to plead such a case may well exceed anything that Twombly requires (a unanimous Court in Swierkiewicz labeled that “evidentiary”). All we can say is that plaintiffs can no longer use Conley as an easy way out when they want to allege everything, but plead nothing.

What none of Twombly/Iqbal’s critics address – probably because nobody likes to look foolish denying the obvious – are the fundamental economic premises that drove the Court to overrule the extraordinary liberal gloss that Conley put on Rule 8 a half-century ago. Liberal discovery is what killed liberal pleading. That’s pretty obvious from Twombly. Critics of more rigorous interpretations of Rule 8’s “short and plain” pleading standard aren’t likely to get anywhere as long as they completely ignore or at best give short shrift to the elephant that’s in the room.

5 comments:

Max Kennerly said...

Let me take a wild guess: you also oppose permitting plaintiffs limited precomplaint discovery, discovery limited to that necessary to prepare a complaint, too.

If so, then it's quite clear every last word above is pure hypocrisy -- that your concern is not avoiding the expense of unmeritorious suits, but rather simply dismissing as many suits as possible, regardless of merit.

If not, then you might want to address the fundamental unfairness of requiring a plaintiff specifically plead that which the defendant has hidden from him.

Beck/Herrmann said...

We're not opposed to precomplaint discovery in principle. It exists, for example, in Pennsylvania, which is a fact pleading state. If there's something specific that's critical, precomplaint discovery works OK. But we've also received precomplaint requests that look like somebody just changed a couple of words in the title and filed their usual discovery. We consider that abusive.

We're certainly not going to agree to a fishing expedition for unspecified "FDA violations" either before or after a complaint is filed - but if there's something specific, say an FDA 483 letter, precomplaint discovery to determine whether the particular drug/device that plaintiff used was within the scope of the FDA's complaint would be something we'd be open to considering (sorry, we can't be more definitive in a public forum).

Almost all drug product liabilty cases, and the majority of device cases, are failure to warn cases. The warning is public information, the alleged risk is public information, and the injury should be known to the plaintiff. Nothing more is needed to plead plausible facts that would support a claim under Twombly, and I don't think you'll find any Twombly cases stating otherwise. It's the multi-defendant and violation claims that draw these objections. As we said, that's where we see old fashioned post-complaint discovery and amendment to complaints as appropriate.

Max Kennerly said...

That's fair as a general proposition, and I think the Pennsylvania Supreme Court had it right to limit precomplaint discovery to that which plaintiff had "probable cause" would be needed to prepare a complaint.

And though I do not practice in your area of FDA-regulated mass torts, I do believe plaintiffs should be expected to do that which they can do to prepare their complaint. If there are public documents which they can review prior to the complaint, then they should do so.

My problem is expecting the plaintiff to do that which he or she cannot. In Twombly, for example, there was of course no way at all for Twombly to know of the existence of an "agreement" between the defendants, because the "agreement" would quite clearly have been kept secret since it would have been illegal! Yet, the Supreme Court refused any attempt to discover if such agreement actually did insist because the Supreme Court believed, relying upon its infinite wisdom about telecommunications interfirm competition, that there were other plausible explanations for the conduct at issue.

Iqbal (which I have not yet read, FYI) appears similar: there was of course no way for the plaintiff to directly know of Ashcroft's personal participation, so the Supreme Court held such participation could not have occurred.

That's unfair. Fact is, when you set down the board of Clue, one of these folks is, in fact, a murder. Perhaps you should not be entitled to depose them all on your mere accusation; yet, is it really so burdensome to permit an initial inquiry as to the proximity of the pipe and Colonel Mustard to the dining room at the time of the crime?

The Third Circuit had a good answer in Craftmatic Securities, in that pleading standards were relaxed where the relevant information was in the exclusive control of the defendants. That, plus precomplaint discovery, would go a long way towards establishing an appropriate balance.

Looking4Trth said...

I would like to thank the authors of this article! I am studying law, only to the extent of obtaining my Paralegal license in the state of AZ. However, I am currently involved in a Federal case that this article addresses issues in most accurately; "Motion to dismiss for failure to state a claim."
I was instructed, by the Magistrate Judge, to resubmit my "Motion for Leave to Amend" by specifically citing Twombly and Iqbal. Your post has made that monumental task seem doable now.
Thank you for the time you invest in posting valuable information that a person can actually use.

Regards,
Looking4trth

Looking4Trth said...

Has anyone seen this post?

"Overturning Twombly and Iqbal"

http://prawfsblawg.blogs.com/prawfsblawg/2009/07/overturning-twombly-and-iqbal.html

Comments?

Looking4trth