Thursday, November 18, 2010

TwIqbal Applies To Complaints Removed From State Court

We did a post the other day about, among other things, the applicability of the TwIqbal federal pleading standard in removed cases.  We discussed Maness v. Boston Scientific, 2010 WL 4629984 (E.D. Tenn. Nov. 4, 2010), which held that TwIqbal applies to complaints initially filed in state court but then removed to federal court.


The citations in Maness, however, while nicely bracketing the question whether TwIqbal applies to removed complaints, didn’t exactly address that actual question.  Those cases:  (1) apply pre-TwIqbal federal pleading rules to diversity cases, Minger v. Green, 239 F.3d 793 (6th Cir. 2001); (2) apply TwIqbal to diversity jurisdiction cases filed originally in federal court, Wilkey v. Hull, 366 F. App’x 634 (6th Cir. 2010); and (3) apply federal pleading requirements, generally, to removed complaints; Granny Goose Foods, Inc. v. Brotherhood of Teamsters, 415 U.S. 423 (1974).

So we ask, how many other cases are there out there like Maness – holding specifically that TwIqbal applies to removed complaints?  We’d consider ourselves exceedingly lucky to have stumbled upon the very first case of its kind.  After all, as addressed at some length in Maness, the federal rules do address this situation.  In Rule 81(c), addressing “Removed Actions,” subsection (1), entitled "Applicability," states “These Rules apply to a civil action after it is removed to federal court.”  Judges explicitly have the power to order “repleading” of removed complaints. Rule 81(c)(2).

We decided to take a look.  Here’s what we’ve found.  Maness isn’t the first court to apply TwIqbal to a complaint originally filed in state court.  In fact, it isn’t even the first drug/medical device product liability decision to do so.  What we can say for Maness is that it contains the most thorough and extensive discussion of the issue – but there are other decisions that come close.

As we expected, most courts hold, as we think they should, that TwIqbal applies to complaints removed from state to federal court.  In Braden v. Tornier, Inc., 2009 WL 3188075 (W.D. Wash. Sept. 30, 2009), a medical device case that we discussed before, the court ruled in no uncertain terms that TwIqbal applied to any complaint removed to federal court:

Contrary to Plaintiffs’ assertions, it is well-settled that the Federal Rules of Civil Procedure apply in federal court, irrespective of the source of the subject matter jurisdiction, and irrespective of whether the substantive law at issue is state or federal.  Accordingly, the Federal Rules of Civil Procedure and the U.S. Supreme Court’s holding regarding pleading requirements announced in [TwIqbal] apply.  The Court understands Plaintiffs’ plight – being held to one pleading standard in state court, where they chose to file their case, and being held to another after the case is removed.  However, the law is clear, Fed. R. Civ. P. 81(c)(1) states that the Federal Rules of Civil Procedure “apply to a civil action after it is removed from a state court.”  This action has now been removed and the federal rules apply.
2009 WL 3188075, at *2 (other citations omitted).

TwIqbal was also applied over the plaintiff’s objection in Wendell v. Johnson & Johnson, 2010 WL 271423 (N.D. Cal. Jan. 20, 2010), a prescription drug product liability case:

The parties disagree as to whether federal or state procedural law applies to this motion. Plaintiffs argue that, because the complaint was filed in state court, California’s pleading rules govern. This is not correct.

A Rule 12(b)(6) motion considers the substantive sufficiency of the pleadings as if the action had never been in state court. . . . Further, Federal Rule of Civil Procedure 81(c) provides, “These rules apply to a civil action after it is removed from state court.” This action has now been removed; therefore, federal law, not state law, governs the specificity that Plaintiffs must plead in order to survive a 12(b)(6) motion.
Id. at *2 (Granny Goose quotation omitted)

In Rockwood Retaining Walls, Inc. v. Patterson, Thuente, Skaar & Christensen, P.A., 2009 WL 5185770 (D. Minn. Dec. 22, 2009), the court rejected the same contention for much the same reason as did Maness – but only devoted a footnote to the issue:

Plaintiffs suggest that the controlling standard is one of state law.  The Court recognizes that the Amended Complaint was filed originally in state court, but once the action was removed, that complaint must satisfy the current federal pleading standard as defined by the U.S. Supreme Court's decisions in Twombly and Iqbal.
Id. at *6 n.6.  Likewise, in Lin v. Chase Card Services, 2010 WL 1265185 (D.N.J. March 26, 2010), the court needed only a footnote to swat away an argument for state law.  Id. at *2 n.2 (“Plaintiff argues that instead of Rule 8(a)(2), the pleading requirements . . . of the New Jersey Rules . . . should apply to his complaint since it was originally filed in state court.  Plaintiff’s assertion is incorrect.”) (citing Rule 81(c)).

In another case of Minnesota origin, the defendant removed the case from a state court that did not require formal pleadings at all.  Once the case was in federal court, however, a formal, TwIqbal-compliant complaint (those two words are spelled quite similarly) was required:

[Plaintiff’s] opposition to [defendant’s] motion to dismiss is confined to the argument that the motion “is specious because there is no complaint,” that is, because under Minnesota law its conciliation courts “should not be ‘burdened with rules and traditions which are applicable to courts more formally convened.’”  Granted, the pleading removed to this Court originated in Minnesota Conciliation Court, which requires only a short statement of “what happened and when it happened.”

But now that the action is proceeding in federal court, the pleadings must conform with the applicable federal rules as interpreted by the federal courts.  See Willy v. Coastal Corp., 503 U.S. 131, 134-35 (1992) (noting that under Rule 81(c), the federal rules “‘apply to civil actions removed . . . from the state courts and govern procedure after removal’”).  See generally 14C Charles Alan Wright, Arthur R. Miller, Edward H. Cooper & Joan E. Steinman, Federal Practice and Procedure §3738 (4th ed. 2009) (noting settled rule that removed actions “will be governed by the Federal Rules of Civil Procedure and all other provisions of federal law relating to procedural matters”).
Smith v. Local Union No. 110, International Brotherhood of Electrical Workers, 681 F. Supp.2d 995, 1006 (D. Minn. 2010).

The same thing happened in Rankin v. Mattamy Homes Corp., 2010 WL 3394036 (M.D.N.C. Aug. 26, 2010).  The court applied TwIqbal to a removed complaint over the plaintiff’s reliance upon looser state pleading standards:

Plaintiff also argues that because she first brought this case in state court, and it was removed to federal court, she should somehow be excused from federal pleading standards. I do not agree. Plaintiff is not absolved of the pleading requirements under the federal rules and Twombly and Iqbal simply because the action was first filed in state court.
Id. at *3.  Accord Jackson v. Mecklenburg Co., 2008 WL 2982468, at *2 (W.D.N.C. July 30, 2008) (applying TwIqbal; state “pleading requirements, so far as they are concerned with the degree of detail to be alleged, are irrelevant in federal court”).

The argument that state law trumps TwIqbal in a removed action was found “completely without merit” in Heffley v. Acme Markets, Inc., 2009 WL 1090660 (D.N.J. April 20, 2009):

Plaintiff’s only opposition . . . argu[es] that the since the Complaint was initially filed in state court it should not be held to federal pleading standards.  This argument, however, is completely without merit.  It is axiomatic that the Federal Rules of Civil Procedure apply to actions after they are removed from state court.
Id. at *2 (citing Rule 81(c)).

And again, in Davenport v. Sugar Mountain Retreat, Inc., 2009 WL 3415240 (N.D. Okla. Oct. 16, 2009), the court also rejected the applicability of state pleading standards to a removed complaint:

Plaintiff argues that his amended complaint “was more than sufficient in the standards applicable in Oklahoma courts where this matter was originally filed before removal.”  However, the case was removed to federal court and this Court must apply Rule 12(b)(6), as interpreted in Twombly, to determine if plaintiff's amended complaint states a claim.
Id. at *2.

Before that, in Stearns v. Select Comfort Retail Corp., 2008 WL 4542967 (N.D. Cal. Oct. 1, 2008), also rejected a plea to apply looser state law to a removed complaint.

The parties disagree as to whether federal or state procedural law applies to this motion.  [Defendant] points out that the action was removed properly to this Court . . ., and after that, accordingly, pursuant to the Class Action Fairness Act, federal law applies. . . .  The Court agrees with [defendant] that federal procedural law applies here.  As Rule 81(c)(1) of the Federal Rules of Evidence plainly states, “[t]hese rules apply to a civil action once it is removed from state court.”
Id. at *2-3 (other citations omitted). Another, even earlier, post-Twombly decision out of California agrees, pointing out:

Whether Plaintiff's allegations are sufficient under state-law pleading requirements is inapposite.  Although Plaintiff initially filed his complaint in state court, his case was removed to federal court and is subject to federal pleading requirements under Fed. R. Civ. Proc. 8.  Thus, that Plaintiff’s complaint was originally filed in state court and that such complaint might have been sufficient under state law does not absolve him from complying with federal pleading requirements now that he is in federal court.
Provencio v. Armor Holdings, Inc., 2007 WL 2814650, at *2 (E.D. Cal. Sept. 25, 2007) (citing Rule 81(c) and Granny Goose).

In addition, we found quite a few cases that applied TwIqbal to removed complaints in situations where the plaintiff – there are some who are reasonable – did not contest the applicability of the federal pleading standard under Rule 81(c).  Muth v. State Farm Fire & Casualty Co., 2010 WL 3805386, at *1 n.1 (M.D. Pa. Sept. 22, 2010); HSBC Bank Nevada, N.A. v. Murungi, 2010 WL 3170736, at *2-3 (E.D. La. Aug. 11, 2010); Nordby v. Wells Fargo Home Mortgage, 2010 WL 1539829, at *1 (E.D. Cal. April 16, 2010); Blake v. Cree, Inc., 2010 WL 302790, at *2 (M.D.N.C. Jan. 19, 2010; IndyMac Venture, LLC v. Silver Creek Crossing, LLC, 2009 WL 3698513, at * 3 (W.D. Wash. Nov. 3, 2009); Hostway Corp. v. JPMorgan Chase Bank, N.A., 2009 WL 2601359, at *5 (N.D. Ill. Aug. 24, 2009); Bernegger v. Morrissette, 2009 WL 911394, at *4 (E.D. Wis. March 31, 2009); Ruth v. Unifund CCR Partners, 2009 WL 585847, at *3 (N.D. Ohio, March 6, 2009); Spence v. Brownsville Area School District, 2008 WL 2779079, at *2 (W.D. Pa. July 15, 2008); Himmelheber v. EV3, Inc., 2008 WL 360694, at *1 (W.D. Ky. Feb. 8, 2008).

After all our research, the only case we’ve found that went the other way remains that strange little Avandia decision that we blogged about before, – In re Avandia Marketing, Sales Practices & Products Liability Litigation, 2009 WL 1708078 (E.D. Pa. June 17, 2009), having now done all this research, we went back to see what the Avandia judge considered to be contrary authority.  The answer is nothing.  The court just jumped over Rule 81(c) without even mentioning it and went straight to New Mexico pleading rules:

[Defendant] contends these allegations are inadequate because they do not include facts that would explain how [defendant’s employee] knew or should have known of Avandia’s purported defects.  In other words, [defendant] argues that it is not enough under New Mexico pleading law for Plaintiffs merely to allege that [the employee] knew or should have known of Avandia's defects.  Defendant's position is that Plaintiffs must allege facts establishing the basis for such knowledge or responsibility.  [Defendant] does not reference the pleading standards of New Mexico or cite a case applying New Mexico law that directly supports its position.
Id. at *5.   See also Id. (“[defendant’s] argument is unavailing because it requires a specificity in pleading that is not required under New Mexico’s notice pleading standard”).

Having now studied the issue, we’re more convinced than ever that the court simply messed this up.  We note that Avandia was trying to decide whether a claim existed based upon a fraudulent joinder standard, and that may be the source of the confusion.  We agree that under fraudulent joinder a claim must have no “possibility” of success, and the elements of state-law claims are determined by state law.  TwIqbal doesn’t change that.  Hidalgo v. YRC Logistics Services, Inc., 2010 WL 4366121, at *2 (C.D. Cal. Oct. 28, 2010).

However, there’s no authority that we know of – and certainly nothing capable of overcoming both Rule 81(c) and Supreme Court cases such as Granny Goose and Willy – that fraudulent joinder requires evaluating removed cases under state-law procedural standards for sufficiency of the pleadings.  That’s the realm of Rule 81(c) and TwIqbal, and if the complaint isn’t “plausible” then the claim should be dismissed.  Since the Avandia court didn’t seem to think it was, see 2009 WL 1708078, at *5 (“it is difficult to imagine a scenario in which a drug company divulges otherwise secret information about the dangers of its products in training materials or educational sessions given to sales representatives”), that should have been the end of it under TwIqbal, unless those particular plaintiffs could amend their complaint to state facts as to why their "difficult to imagine" allegations were in fact plausible.

Now that we’ve killed this issue research-wise, it’s clear to us that, when Avandia relied – not on state substantive law, but on state pleading standards to allow a claim that even it did not think was plausible to evade TwIqbal and trigger a remand, the court blew it.

* * * *

Whenever we run a search this broad, we find related cases that we think might be of interest to our readers. Here are a couple more TwIqbal propositions that we discovered.

(1) The TwIqbal pleading standard seems to apply to notices of removal.  Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 199-200 (4th Cir. 2008); Martin v. Wal-Mart Stores, Inc., 709 F. Supp.2d 345, 349 (D.N.J. 2010).  We hadn’t thought about that.

(2) TwIqbal also applies to complaints in actions removed to federal bankruptcy court.  In re Stonebridge of Mint Hill, LLC, 2010 WL 3943764, at *2-3 (Bkrtcy. W.D.N.C. Oct. 7, 2010); In re GTI Capital Holdings, LLC, 420 B.R. 1, 9 (Bkrtcy. D. Ariz. 2009).

3 comments:

Cocaine Princess said...

Twlqbal- ahh yes, that topic of discussion is being discussed in South Florida too!!

Anonymous said...

The tougher question is what standard is applied when a case is removed under 1332(a) under a theory that a non-diverse defendant was fraudulently joined. Often courts will determine whether a defendant has been fraudulently joined (and thus irrelevant to diversity) based on whether the plaintiff has stated a claim against them. But where a state's pleading standard is less stringent than Twombly/Iqbal, which pleading standard does the federal court apply to determine if joinder was appropriate? I've seen cases suggesting that the federal court has to apply the state court pleading standard, which makes sense - if joinder was proper, then the case never should have been removed in the first place, so the relevant question is whether the plaintiff stated a claim against the non-diverse defendant in state court.

Anonymous said...

This article is completely wrong. See, e.g., Edwea, Inc. v. Allstate Ins. Co., 2010 WL 5099607, at *5-6 (S.D. Tex. 2010) (noting that the majority of courts apply state-court pleading standards and not Twombly or Iqbal and citing numerous cases in support of this proposition).