Supreme Court's Further Tightening of Procedural Rules Means That Plaintiffs Will Face Additional Hurdles to Gain Access to Courts
August 10, 2009
Leo Rydzewski - Washington
One of the most significant recent legal developments is the sea change in the interpretation of procedural rules governing what facts a plaintiff must allege to gain access to the courts.
Beginning before the advent of World War II and continuing through the beginning of the 21st century, federal courts allowed plaintiffs to proceed with litigation so long as they placed the defendant on “notice” of their claims. Taking their instruction from Rule 8(a)(2) of the Federal Rules of Civil Procedure, which states that the complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief,” courts allowed plaintiffs to proceed unless there were “no set of facts” on which they would be entitled to relief. In practice, a plaintiff could meet this burden fairly easily. Indeed, the example that the rules drafters provided for a fully-sufficient complaint for conversion of property, set forth in Form 15, states in its entirety: “On date, at place, the defendant converted to the defendant’s own use property owned by the plaintiff. The property converted consists of describe. The property is worth $___.”
Two recent Supreme Court rulings, however, make it much more difficult for plaintiffs to advance their federal court claims. Plaintiffs no longer will be able to proceed by alleging the elements of a cause of action or making unsubstantiated conclusions. While proper notice still is required, trial courts now must scrutinize the allegations raised in the complaint to determine whether they are based upon facts and not mere conclusions, and whether the well-pleaded facts are sufficient to establish that the claim is “plausible on its face.” In other words, the trial court, at the outset of the case, and before any discovery has occurred, must draw upon its “judicial experience and common sense” to determine whether the allegations in the complaint are sufficient to draw a reasonable inference that the defendant is liable for the alleged misconduct. In so doing, the trial court first must determine whether the complaint alleges facts or mere conclusions masquerading as facts. Trial courts are prohibited from considering conclusory allegations in assessing a complaint’s sufficiency.
Lurking behind the heightened standard is a concern over the increased costs of discovery and the prospect of requiring high-level government officials – as well as companies and high-level business executives – to spend their time and money on discovery when the complaint fails to identify specific facts showing that they are culpable. Litigation is expensive, both in time and money. Through these decisions, the Court is taking additional steps to better ensure that a plaintiff has a viable case before proceeding to impose those costs upon others.
The Supreme Court Introduces the “Plausibility” Pleading Standard
The Supreme Court dropped a “bombshell” on the legal community in 2007 when it announced, in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), that a new standard would govern the filing of civil complaints in federal court.
Twombly involved a massive class action alleging antitrust violation under the Sherman Act. Plaintiffs – a putative class of at least ninety percent of all telephone or high-speed internet access subscribers – alleged that the country’s largest telecommunications providers unlawfully agreed not to compete with one another in their local telephone and/or internet services markets. Plaintiffs further alleged that while federal law required these telecommunications providers, which had established telecommunications networks, to share their networks with competitors, the providers each had established similar barriers for other companies to enter each of their service territories, such as inferior connections, unfair agreements and excessive billings. Since the Sherman Act only prohibits anti-competitive conduct that is “effected by a contract, combination, or conspiracy,” plaintiffs alleged that the defendants “ha[d] entered into a contract, combination or conspiracy to prevent competitive entry . . . and ha[d] agreed not to compete with one another.” Plaintiffs supported their allegation of an unlawful agreement with claims that defendants engaged in a “parallel course of conduct . . . to prevent competition” and inflate prices.
The Court reaffirmed that in analyzing the sufficiency of a complaint, while “detailed factual allegations” are not required, a plaintiff must plead more than labels and conclusions, and a “formulaic recitation of the elements of a cause of action” will not suffice. The Court expanded on this standard, however, by announcing that a complaint must allege “enough facts to state a claim to relief that is plausible on its face.” To be plausible, the complaint must allege facts sufficient “to raise a reasonable expectation that discovery will reveal evidence” of illegality. According to the court, the complaint must establish a plausible entitlement to relief, which is not akin to a probability requirement, but is more than a sheer possibility that a defendant has acted unlawfully. Indeed, facts that are “merely consistent with” a defendant’s liability also are insufficient.
Under this new standard, the Court found plaintiffs’ allegations deficient. According to the court, plaintiffs’ assertion of an unlawful agreement was a “legal conclusion” that was not entitled to the presumption of truth. Moreover, the Court acknowledged that the parallel conduct alleged in the complaint – i.e., a number of businesses acting in the same way – was consistent with an unlawful agreement to restrain trade, but concluded that it did not plausibly suggest an unlawful conspiracy because it was compatible with, and more likely explained by, companies undertaking independent actions and pursuing lawful free-market behavior. In other words, each company may have been acting out of its own self-interest in defending its own business territory, and “resisting competition is routine market conduct.” The Court also found insufficient the allegation that the telecommunications companies were not competing against each other in their respective territories, and attributed this to “an obvious alternative explanation,” namely, that a monopolist tradition in which the “former Government-sanctioned monopolists were sitting tight, expecting their neighbors to do the same.” The Court thus held that the complaint was not “plausible on its face,” and must be dismissed.
Twombly thus set a new legal standard for federal court complaints. Under Twombley, courts need to determine whether the factual allegations are plausible. If there is a lawful explanation consistent with the facts as alleged, then the complaint is implausible and fails to state a claim.
Commentators agreed that Twombly was a significant decision, but disagreed on its reach. Did the plausibility standard apply only in antitrust and conspiracy cases? What level of factual specificity is required? How demanding would the courts be in requiring plaintiffs to demonstrate that their claims are plausible?
The Court Expands the Test
In Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009), the Supreme Court answered some of these questions and greatly expanded upon the “plausibility” standard set forth in Twombley. The Court in Iqbal held that before allowing a plaintiff to proceed with discovery in federal court, a trial court must use its “judicial experience and common sense” to determine whether the allegations raised in the complaint are facts that the court properly may consider, or mere conclusions that the court may disregard. The court’s second-guessing of a complaint’s factual allegations presents an additional, significant barrier to plaintiffs seeking relief in federal court. Indeed, Justice Souter – the author of the decision in Twombley – filed a dissent in which he challenged that Iqbal “misapplies the pleading standard” set forth in Twombley.
The dispute arose after Javaid Iqbal, a Pakistani Muslim who worked as a cable TV installer on New York’s Long Island, was arrested after the September 11, 2001 terrorist attacks along with more than 1,000 others, mostly Arabic men. The government designated Iqbal a person “of high interest” to the September 11 investigation and detained him under restrictive conditions. Iqbal spent 23 hours a day in lockdown, and the remaining hour outside his cell in handcuffs and leg irons accompanied by a four-officer escort. Iqbal claimed that, while in detention, his jailors “kicked him in the stomach, punched him in the face, and dragged him across” his cell, deprived him of medical attention, subjected him to serial strip and body-cavity searches, refused to give him adequate food, and interfered with his attempts to pray and access counsel, all without lawful justification.
Mr. Iqbal never was charged with any connection to terrorists but he pleaded guilty to having fraudulent immigration documents, served a prison term, and was deported to Pakistan. He subsequently filed a Bivens action (a civil law suit against federal government officials) for monetary damages against 53 federal current and former federal officials and corrections officers, alleging, inter alia, that they subjected him to harsh conditions of confinement as a matter of detention policy for the purpose of discriminating against him (and other Arab Muslims) on account of race, religion, or national origin, and not because of any evidence of involvement in supporting terrorist activity. Iqbal alleged that former Attorney General John Ashcroft was the “principal architect” of the policy and that FBI Director Robert Mueller was “instrumental” in its adoption and execution.
Messrs. Ashcroft and Mueller asked the trial court judge to dismiss the case on the grounds that the complaint was insufficient and that they, as federal government officials, were immune from suit. The trial court denied the motion and Messrs. Ashcroft and Mueller filed an interlocutory appeal under the collateral order doctrine. The Second Circuit affirmed.
Reversing and remanding, the Supreme Court in a 5-4 decision confirmed that the new standard announced in Twombley – that a plaintiff must allege sufficient factual matter to “state a claim to relief that is plausible on its face” – applies in all federal cases. According to the Court, “an unadorned, the-defendant-unlawfully-harmed-me accusation is insufficient,” and a complaint that raises merely “naked assertions” devoid of facts, must be dismissed. Instead, the complaint must allege facts sufficient to allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.
The Court also articulated two important principles. First, a court is not required to accept a complaint’s allegations as true where the complaint makes threadbare recitals of a cause of action’s elements, supported by mere conclusory statements – “conclusory” factual allegations may not be considered. Second, a court only will allow a plaintiff to proceed with the case if the complaint states a plausible claim for relief. Determining whether a complaint states a plausible cause of action is context-specific, requiring the court to draw on its “judicial experience and common sense.” A complaint that alleges only conclusions is insufficient. A trial court must determine whether the factual allegations “plausibly give rise to an entitlement to relief.”
The Court concluded that Mr. Iqbal had not “nudged his claims of invidious discrimination across the line from conceivable to plausible.” Allegations that former Attorney General Ashcroft was the “principal architect” of the unlawful policy, and that FBI Director Mueller was “instrumental” in its adoption and execution, the Court held, were “a formulaic recitation of the elements of a constitutional discrimination claim,” and thus not entitled to be assumed to be true. Furthermore, the Court concluded that the factual allegations did not plausibly suggest an entitlement to relief because there is “no surprise” that the post-9/11 detention policy would produce a disparate, incidental impact on Arab Muslims, given that the September 11 attacks were perpetrated by Arab Muslim members of Al Qaeda. The “obvious alternative explanation,” the Court concluded, was a “nondiscriminatory intent to detain aliens who were illegally present in the United States who had potential connections to those who committed terrorist acts,” and as between that “obvious alternative explanation” and Iqbal’s claims, “discrimination is not a plausible conclusion.” The Court also found nothing to suggest that Messrs. Ashcroft and Mueller themselves acted on account of a constitutionally protected characteristic -- there were no factual allegations “sufficient to plausibly suggest [their] discriminatory state of mind.”
Justice Souter filed a dissent contending, inter alia, that the Court’s decision “misapplies” Twombley in “discard[ing]” the specific allegations in the complaint as being “conclusory” and “bare assertions.” According to Justice Souter and the three Justices who joined in the dissent, with some very narrow exceptions for fantastic allegations such as a claimed experience with time travel, a court should accept the allegations as true, no matter how skeptical the court may be. In the dissenters’ view, the allegations that FBI officials discriminated against Mr. Iqbal solely on account of prohibited factors, and that Messrs. Ashcroft and Mueller played important roles as architect and implementer of the discriminatory policy, constituted factual allegations that were sufficient to state a claim that Messrs. Ashcroft and Mueller should be held liable for the illegal policy.
Federal Complaints After Twombley and Iqbal
Under the new standard set forth in Twombley and Iqbal, a federal-court plaintiff must plead facts sufficient to allow the court to determine that the claim is plausible – the court must be able to draw the reasonable inference that the defendant is legally responsible. The plausibility analysis is context-specific and requires the court to draw on its “judicial experience and common sense.” Iqbal expanded upon Twombley by making clear that when reviewing the sufficiency of a complaint, “conclusory” allegations may not be considered. Complaints that provide no factual basis for believing that conclusory allegations actually occurred no longer will suffice. In other words, a plaintiff must have more than suspicions. The mere belief that a defendant has acted improperly, without any factual allegations supporting that belief, no longer is enough. Where the complaint lacks facts, the new rule requires dismissal.
In practice, one of the primary issues that will emerge after Iqbal is whether allegations contained in a complaint are factual allegations that the court must evaluate to determine whether a cause of action is plausible, or mere conclusions that the court may disregard in assessing the complaint’s sufficiency. Unfortunately, the Supreme Court did not announce a test for making that determination. The Court did not give any example of “non-conclusory” facts that Mr. Iqbal could have alleged – beyond his allegations that Messrs Ashcroft and Mueller prepared and implemented a policy to subject Mr. Iqbal to harsh conditions of confinement solely on account of his religion and national origin – to sustain his burden of supporting his claim that Messrs. Ashcroft and Mueller prepared and implemented a policy with discriminatory intent. Perhaps for that reason, Justice Souter has suggested that Iqbal invites trial courts to read facts out of the complaint by labeling them as mere conclusions. Given that the Court was split 5-4 as to whether the facts Mr. Iqbal alleged were conclusory, we should expect the lower courts to struggle with this categorization as new fact patterns emerge.
The new plausibility standard, coupled with the requirement that a plaintiff allege facts and not merely conclusions, will present a significant obstacle for some federal court plaintiffs, who may experience difficulty obtaining those facts before filing suit. In suits involving government actors, plaintiffs may have difficulty alleging facts showing that high-level officials such as Messrs. Ashcroft and Mueller directly participated in an unconstitutional policy, and may in fact need a “smoking gun” – an email, for example, in which Mr. Ashcroft admits that he is intending to discriminate against Arab Muslims – to be allowed to proceed with discovery. Commercial business disputes involving corporations and high-level business executives present a similar situation. A plaintiff may not have the ability to obtain necessary factual information before filing suit, and in the absence of discovery, may find that the courthouse doors are closed. Defendants will welcome this result, as the proliferation of “frivolous lawsuits” has caused many defendants to pay substantial sums to settle cases, not on their merit, but simply to avoid the substantial costs of litigation.
Nevertheless, in certain categories of cases, particularly those in which the defendant’s state of mind or motivation is at issue, the court has set a very high – potentially insurmountable – barrier for plaintiffs to overcome, as the factual details the court is requiring – such as when and where communications occurred, and the substance of those communications – may not be available without discovery. It is not clear, for example, that Mr. Iqbal could have obtained relevant documents that might have contained additional facts through a FOIA request. Unless a plaintiff could obtain those facts in a pre-suit investigation, in some cases courts may not allow a plaintiff to proceed with cases alleging that companies, corporate executives or high-level government officials acted unlawfully. The result is that the courts may dismiss lawsuits before the alleged victims have an opportunity to obtain discovery that may validate their claims.
Lower courts faced with complaints alleging facts that present more than mere conclusions also will need to determine the circumstances in which an alternative explanation to the alleged wrongdoing is so “obvious” that a plaintiff should not be permitted to proceed with discovery. In Iqbal, the Court determined that in an investigation focusing on al Qaeda, the government likely would detain a disproportionate number of Arabs and Muslims, not because of prejudice, but because Arabs and Muslims would be a likely source of information. This source of the disparate impact was such an “obvious” alternative explanation that the court was unwilling to allow Mr. Iqbal to attempt to attribute an unconstitutional policy to government officials without direct factual evidence that they were involved. Indeed, Messrs. Ashcroft and Mueller argued that Iqbal’s claims were implausible because such high-ranking officials “tend not to be personally involved in the specific actions of lower-level officers down the bureaucratic chain of command.”
Here, again, the Court in Iqbal significantly expanded this requirement. Whereas the court in Twombley dismissed the case based upon an explanation that was consistent with the facts contained in the complaint, the court in Iqbal takes this a step further by dismissing the case based upon an explanation that was inconsistent with the alleged facts. If the events had unfolded as Iqbal described in the complaint, then the government officials violated his constitutional rights and he was entitled to judicial relief. Casting the factual allegations as “conclusory” and not entitled to consideration allowed the Court to ignore those allegations and identify a “more likely” explanation that made the alleged unconstitutional conduct implausible.
It is too soon to tell whether lower courts will dismiss future cases where there is some other explanation for the allegedly actionable conduct. Indeed, while a judge may be able to speculate about potentially lawful reasons for a defendant’s actions, of course that does not mean that they in fact acted in that manner. The situation in Iqbal was rather unique. There are few circumstances in which a defendant will be granted more discretion than a government official’s response to the 9/11 attacks. In other factual circumstances, however, a court may find believable the allegation that the leaders of an organization (either the government or a business) knew about and were involved in the wrongful conduct of their subordinates. The lingering question is: at what point should a court determine that other explanations are so “obvious” that a plaintiff must be denied the ability to obtain discovery and proceed with the merits of the case?
The Court Strikes a New Balance
In tightening the procedural rules governing the filing of civil complaints in federal court, the court is striking a balance between an open court system that gives plaintiffs the opportunity to present their claims, and an efficient system that does not saddle defendants with frivolous litigation and unnecessary costs. This balance involves two kinds of risks: the risk that a plaintiff with a meritorious case will be unable to proceed, and the risk that a plaintiff who does not have a meritorious case will be allowed to impose substantial costs upon the defendant through the discovery process. With Twombley and Iqbal, the balance has shifted in favor of the defendant. As the Court noted in Twombley, because “the threat of discovery expense will push cost-conscious defendants to settle even anemic cases,” the Court will require sufficient factual allegations to ensure there is a “reasonably founded hope that the discovery process will reveal relevant evidence” to support a claim.
There are several likely results of the new, more restrictive standard for evaluating the sufficiency of a complaint. Some plaintiffs who may have meritorious cases will be unable to obtain facts sufficient to withstand a motion to dismiss and thus will decide not file their complaints. Other plaintiffs will file complaints without the factual support and will have their claims dismissed. Given the substantial cost of discovery, more defendants will file motions seeking to dismiss complaints before discovery begins. The perhaps inevitable result is that efficiency will improve as more actual and potential defendants are able to avoid the substantial costs of discovery, but there also will be an impact on justice, as some plaintiffs who have been wronged will not be able to advance their claims in court.
The rulings will have a significant impact on litigation practice, including what is likely to be a deluge of motions seeking to dismiss complaints at the outset. Plaintiffs will need to draft longer complaints that provide factual details supporting each element of a cause of action, including damages. While in many circumstances plaintiffs simply need to provide additional facts already known, in many cases, plaintiffs will need to conduct additional pre-suit factual investigations to gather the information that the trial court will require. The new pleading standard will encourage defendants, on the other hand, to seek an early dismissal in an attempt to avoid the substantial costs of discovery. Some plaintiffs will not be able to make sufficient factual allegations, and thus will not be able to advance their claims.
Trial Courts Will Have Wide Discretion in Evaluating Complaints
Under the prior notice pleading standard, trial courts were loathe to dismiss federal complaints that alleged the elements of a cause of action, as such a decision likely would be reversed by the court of appeals. The Iqbal decision, however, greatly enhances the power of trial courts to dismiss cases at the outset of the litigation. With respect to discrimination claims in particular, judges will have much wider discretion to dismiss complaints raising allegations about a defendant’s motivations where there is no direct evidence alleged in the complaint supporting the claims.
While the trial courts likely will dismiss cases with greater regularity, a judge who believes there is some merit to the case still may allow it to proceed, and the decision ordinarily is not immediately reviewable. (The defendants in Iqbal only were allowed to file an immediate appeal because they alleged government immunity; defendants who are not high-level government officials would not have the same opportunity to take an immediate appeal of a trial court’s decision to allow the case to proceed.) A case that lacks merit presumably will not advance to a judgment favorable to plaintiff, and a case that is successful will have the facts to support it.
The question that remains is the extent to which trial courts will “disregard” allegations raised in complaints by labeling them as “conclusory” and “bare assertions” that are entitled to no consideration. In practice, the trial courts simply may apply the new dichotomy between conclusory and factual allegations to dismiss only those claims that appear to be frivolous. However, if the trial courts apply the new standard to shield high-level government officials, corporations and business executives from suit from unlawful activity, then the decision will have far-reaching consequences.
Will Lawmakers Step In?
The Iqbal decision is noteworthy both for the imposition of a more stringent pleading standard and the foundation upon which it rests. The court undertook this sea change in pleading standards by judicial interpretation, and not through any democratic or political process. Neither Congress nor the American public sought to overturn the “notice”-pleading standard that governed for nearly seven decades, and the rules drafters did not conduct an extensive study and then amend the federal rules of civil procedure. Instead, the Court simply issued a ruling in a case. How the lower courts interpret the decision likely will have a great impact on whether the rules are modified to conform to this new pleading standard, or revised to restore the pre-Twombley/Iqbal landscape.
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